NASCAR veteran reaches IRS plea
Tax pros, vent here!

California tax refunds on hold

UPDATE, March 6:
Despite enactment of a budget,
state tax refunds are still on hold.

UPDATE: On Feb. 19,
California lawmakers
reached a budget agreement.
So Golden State tax refunds
should be processed shortly.

Arnold wasn't kidding about California's fiscal problems.

Red pen_crystl The Golden State's finances are deep in the red right now. In fact, things have gotten so bad that the state's controller says that if lawmakers don't come up with a way to cover California's $42 billion budget deficit, on Feb. 1 he will put a 30-day hold on tax refunds and some other payments.

This action would affect a great many early filers, who get their returns in as soon as possible because they are expecting a refund. All filings that state tax officials get to before Feb. 1 will go out as usual. But those that haven't been processed by then will be held.

The state typically cuts checks as it processes returns, but under state law, tax refunds don't have to be issued until May 30.

Fast running out of money: California has not had a positive cash balance since July 12, 2007, and things have just gotten worse.

The perfect financial storm of job losses, plummeting home values and the stock market quasi-crash have taken a toll on the California treasury. Those weak economic factors have led to a severe drop in state revenue from sales, property and capital gains taxes.

And Controller John Chiang acknowledged during a news conference in Sacramento to announce the refund hold plan that delaying tax refunds and payments will only exacerbate the weak economy. People will not be able to use their tax refunds to buy cars or pay bills, he said.

"'Let me make this perfectly clear: This is a painful decision," Chiang said. "'It is an action that is critically necessary. The fallout from issuing IOUs, or for the state going into default, are significant and long-lasting and something to be avoided at nearly all costs."

Pen photo by Crystl (Flickr/Creative Commons)

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

Chris

Eighth largest economy in the WORLD??? Yes. Extremely liberal??? - Yes. God help us now that the liberals control Congress and the Presidency. This is what we're in for, comrades!

James Buckles

I agree with many that have written back to me with comments like:
"Isn't that REALLY your money that they are holding back? How can this be legal?

"Somebody (actually everybody) should think about a class action lawsuit. You would probably get your money faster that way.

ElizaB

I too filed my taxes early (electronically), but I have yet to receive my refund. FTB says it was already authorized and should receive it in 10 days, and that has gone by, and I am upset that they put in on hold. This sucks. They should cut out or reduce the entitlements, instead of punishing the workers and taxpayers.

clw

I to will have my refund held hostage and my immediate reaction will be to go over what I claim to make sure they are never able to do it again. i assume many in not most others will do the same. So what will they do when all those overpayments stop coming in?

Pissed off in Alabama

It is absolute b.s. only in a state that thinks that it is so far ahead of everyone else and elitist like California could they screw up something so basic as not spending money that you do not have, and punishing the good people of the world who pay their due in taxes. What a pathetic state government. Sorry Californians, but this is definitely something that we Alabamians are kicking your butts in. We have always had a balanced budget. No wonder people are leaving your state in droves. My wife was a travel nurse in California last year, and now California is holding her refund hostage and it is not right.

Eudocia

Thankfully I no longer live in California, but it seems to me that this is a fine mess that only government can cause. Hmmmmm, did the Gov. think about cutting back on expenses? Nah, probably not. How about cutting back on "freebies" to those who don't work? Nah, probably not. What's a guy to do? Oh, I know, screw the people who pay your salaries!!! Great idea!!! They are sheep and we have the shears to clip them!
My only hope is that this fails miserably. Horrors! What if the IRS tries to take up this tactic to help make up for all the excess government spending? Does anyone think that this problem is going away any time soon? How can Nancy Pelosi and Company push all their social policies through if they don't have ALL the money from the evil people who work for a living. Sorry Joe Biden, I actually contributed more to charity than you did, so I think I'm already steppin' up.

Extremely angry regardless of where I live,

Eudocia

Mirawho

The whole refund hold is bad. First it bad for an already unpopular governor who really came in and decided that taxing was the solution to all financial woes for the state. Then, after he taxes, he holds the refunds. Bad move, Arnie. You were a "B" actor and are now a "D-" governor.

Second, layoffs in California are rampant. Superior Industries (the guys who make auto wheels for most of the major car makers) closed shop in Van Nuys, California for good, throwing another 300 people into an already taxed job market in the San Fernando Valley. And Robinsons just laid off a very large number of employees, stating that consumers weren't spending. So, if the economy is to get off the ground by people putting money back in industry, why are is the California Government holding the same funds funds back that would help this bad economy in California. I filed my state taxes early and electronically. My refunds status was that my return was processed and awaiting funding. Next thing you know, for a week, they said they could not give me any information. This is tne new message Californians see:

Your return has been received and processed, however, your refund cannot be issued at this time.

Due to the state’s persistent cash and budget problems, the State Controller has directed FTB to stop sending refund requests to the State Controller’s Office for payment. Refund payments will resume when the State Controller indicates there is enough cash available to make refund payments.

Makes me proud to pay taxes in California.

Bill Barnes

WOW! I knew something like this will happen and I don't live there and if one State does it how many others will do that? I wonder if they are late in paying people their tax refund will they pay them back with interest if we were late paying the Government they would make us pay!

Mary

I live in California and although I've filed for me state refund already, I have no doubt the state will manage to not process my return until after February 1. While they hold my refund hostage, they are still taking a lion's share of state taxes out of our paychecks. It seems to me that until they give me my money, I should not be liable to give them theirs (most of which I get back as a refund).

Taxrascal

Are they just not handing over the money, or are they giving people something in exchange? If the state owed me $500, and I got $500 worth of California state bonds maturing in six months, I'd probably be fine -- they could hold on to the cash until then, but if I needed money, I could sell the bonds. Maybe the cost of running a plan like that is too high, though, especially because the median refund is likely to be low, but they can't exactly give bonds to the rich and promises to the poor.

Kristy

Hmmm, this is interesting. I assume this is for the state tax? I'm not knowledgeable on all things taxes, and I live in Texas, so this doesn't even apply to me. However, what purposes does holding the refunds do? It's only temporary, those funds will still have to be issued at some point, and there's no guarantee that California will be recovered any time in the near future. What are some of their long-term plans to fix the problem?

The comments to this entry are closed.