State tax refund denied

State Governments, Seeking to Be Less Popular, Delay Tax Refunds

Taxpayers in Hawaii, Iowa, North Carolina, New York, and Rhode Island expecting a refund may have to exercise some patience, as these states have already declared their intentions to delay cutting those checks to its citizens. And don’t get to excited about receiving any interest on your already interest-free loan you gave them; many states have to withhold refunds for at least 60 days before interest has to be paid.

Pulling this type of a stunt will get you nowhere in a popularity contest but hell, they don’t really have much of a choice:

Scott D. Pattison, the executive director of the National Association of State Budget Officers, said that it was “exceptionally unusual” for so many states to delay refunds, as they have throughout the current economic downturn.

“I think it’s just an indicator of how bad things have been,” Mr. Pattison said in an interview. “It’s politically, obviously, a problem. Also, I think from a policy standpoint, it’s a little hard to justify — this is the taxpayers’ overpayment that is due them.”

Obviously this is going to cause some tea-baggish belly aching but it is pointed out later in the article, if taxpayers really want to do something about this problem, they have the ability to make some changes themselves to avoid this in the future:

Verenda Smith, a spokeswoman for the Federation of Tax Administrators…said she hoped the troubles would prompt more taxpayers to file earlier; file electronically, which allows for much quicker processing time; and change their withholding status with their employers so they would not overpay so much. “You really shouldn’t give it to your state government as a no-interest loan, and then have to cool your heels while you wait to get it back,” she said.

We’ve mentioned this before but it bears repeating – adjusting your withholding to get a big refund is stupid. We’d say that the states keeping it out of your hands was probably a good thing but then again, the state can waste the money just as well.

Half a Dozen States Delay Tax Refunds [NYT]

These Are the Real Scams: The Dirty Dozen Tax Policy Scams

The IRS just came out with its annual “Dirty Dozen” list of tax scams. It is a useful rundown of current ways for taxpayers to create enormous trouble for themselves. While useful, it’s incomplete. It only looks at scams used by taxpayers. Hence, the Dirty Dozen Tax Policy Scams — in reverse order Letterman-style.

12. State non-conformity to federal rules – The federal tax law is complicated enough. When you have to start over in order to compute your state taxes, that’s a recipe for stupid. When you have to file in multiple states, it’s just crazy. California, the nation’s leader in bad ideas, has led the way ttp://www.rothcpa.com/archives/005787.php”>the bandwagon is getting crowded.


11. Asinine feel-good tax breaks – These are stupid tax rules passed to show us just how caring our legislators are. The bill allowing 2009 deductions for 2010 Haiti relief donations is a classic of the genre – it will cause countless people to double up on the charitable deductions, cause state tax return errors, and might well screw up return processing, all without actually helping Haiti.

10. Heads they win, tails you lose provisions – Sometimes the tax laws are designed to screw you. Gamblers are popular screw-ees. The federal tax law taxes gambling winnings above the line, but allows deductions only “below the line,” as itemized deductions, and then only to the extent of winning. If you don’t itemize, you lose. If you don’t have meticulous records, you lose on audit. And in some states, you just plain lose – you are taxed on winning bets, and losses are ignored.

9. Bait and switch tax treats – The alternative minimum tax has made this popular. They enact a politically popular tax break – say, home equity loan deductions – and they disallow it for AMT. So it’s there, but it’s useless.

8. Using the tax law to micromanage your life – Soda taxes. Insulation tax credits. Tax breaks for riding bikes to work. Will anybody ride a bike to work in Des Moines in February because of a $25 tax break? The tax law is full of… this sort of thing.

7. Issuing assessments based on pretend numbers – This has become popular among the states, and at least one academic thinks it should become a national policy.

6. Economic Development Credits – Where the state economic development geniuses take your money to lure and subsidize your competitors. It’s like taking your wife’s purse to the bar to finance your pick-up efforts – the girls aren’t impressed.

5. Film tax credits – If there is a stupider approach to economic development than throwing money at Hollywood, at least this side of North Korea, it must be bipartisan.

4. Sitting on your tax refunds – The states have spent so much of your money that they don’t want to pay what they owe you. When they pay their public employees before they pay what they owe you, it shows where you rank.

3. AGI-based deduction and credit phaseouts – Almost every moronic new piddly tax break goes away as adjusted gross income goes up, whimsically embedding marginal rate spikes all over the tax code.

2. Shooting Jaywalkers – Sometimes the tax law has horrible penalties for trivial, but politically convenient, violations. The 50% of your bank balance FBAR penalty, the $10,000 automatic penalty for late international form reporting, and the insane Section 409A penalties for deferred compensation foot-faults are the kind of penalties that are almost perfectly designed to hammer honesty and reward sneakiness.

1. Expiring provisions – This cynical game enacts popular provisions (see AMT patch and research credit) one year at a time, so that the budgeters don’t have to count the real 5-year cost. The congresscritters, of course, have no intention of letting these things expire, and they often enact foolish permanent tax changes to fund another temporary extension.

Sadly, there’s one key difference between tax policy scams and the Dirty Dozen Tax Scams. You can go to jail if you use a Dirty Dozen Tax Scam, but if you use a dirty dozen tax policy scam, you just stay in Congress forever and ever, amen.