States holding tax refunds
Associated Press
Saturday, July 04, 2009

ATLANTA --- Colin Daymude was out of work last year after his business failed and eagerly filed his taxes in mid-January, figuring he'd get his refund sooner. He was wrong.

It took the 44-year-old entrepreneur more than six months to get his $1,300 check -- money he needed to pay living expenses while he worked a few side gigs.

Sharp budget cuts and falling revenues have forced many states to delay income tax returns for months -- and left taxpayers longing for their money.

Some states say plummeting tax collections drove them to hold on to the money so they can make ends meet. Others complain of not being able to keep up because the economic downturn has forced staffing cuts.

Critics worry governments are withholding funds that belong to taxpayers when they need the extra cash the most. Some states are approaching a stiff deadline of their own: The longer they wait, the more likely they'll have to pony up interest.

In Georgia and Alabama, tax officials are racing to beat a mid-July deadline to send hundreds of thousands of tax refunds or risk racking up millions in interest.

More than 120,000 Alabama taxpayers are waiting for at least $63 million in income tax refunds. Freda Warfield of the Kansas Department of Revenue said tax officials hope to send out $31 million in refunds by next week. The returns average $500 a person.

"The revenue receipts have just been down," she said. "There's not enough coming in to issue all of our refunds."

Analysts say the delays rob the poor of what had become an extra paycheck.

"Low-income families rely on that money getting reimbursed to them in the spring," said Mike Herald, a lobbyist for the Western Center on Law and Poverty, a Los Angeles-based advocacy group. "They pay bills with that money, they buy furniture -- a lot of people rely on that income."

GEORGIA'S DEADLINE APPROACHING

In Georgia, tax officials say more than 320,000 returns still need to be processed. If they are not completed by July 16, the state might have to dish out 1 percent interest for each month it is late.

State tax officials say it's not an issue of money, but an issue of staffing. Georgia Revenue Commissioner Bart Graham said the department had to cut about 280 jobs since October, including more than 150 processors who helped file refunds.

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