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States are holding on to tax refunds

Strapped states are keeping taxpayers' money longer to solve cash-flow problems.

By Kay Bell Feb 23, 2010 11:45AM

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


Quit laughing. More strapped states are holding on to their residents' tax refunds longer.


North Carolina's Revenue Secretary Kenneth Lay has announced that his office is delaying  refund checks that both individuals and businesses are due. Holding on to 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 that 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 refunds 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 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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