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State tax refund delays are now the norm

Remember when everyone was snickering at California for issuing IOUs instead of tax refunds?

Man and woman fighting for money
Quit laughing. More financially-strapped states are holding onto their residents' tax refunds longer.

North Carolina's Revenue Secretary Kenneth Lay has announced that his office is delaying  refund checks due both individuals and businesses. Holding onto the money is a cash-flow necessity, Lay said, because the state is facing a shortfall due to "anemic" collections, a common problem across the United States.

Even paradise is having refund money issues.

The Hawaii Department of Taxation, which already has up to 90 days before it has to send out checks to taxpayers, says come July 1 it will release refunds on a "first-in-first-out basis." Delaying refunds will give the Aloha State a one-time savings of $275 million.

In New York, one of Gov. David Paterson's budget proposals could put taxpayers' refunds on hold to help deal with the Empire State's budget deficit. The proposal, which could delay some refund for weeks or even months, is projected to provide short-term savings of $500 million.

What's a taxpayer to do aside from freak out? Right now, not much.

But if you are one of the taxpayers who will be waiting a while for your state refund, or even if your state was able to pay your your tax cash in a timely manner, you might want to reconsider even being put in this situation.

Adjust your withholding now (at the federal level, too) so that you'll get your tax money throughout this year. In fact, see if you can fix it so that you'll owe your state tax collector a few dollars instead of the other way around.

That way it will be the tax department waiting on you in 2011.

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Oh no, I am in NC. Do they pay you interest on the money that they hold so they can pay their own bills? That's rediculous.

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