Tax Alert: California Delays the Payment of Income Tax Refunds
2/05/2009
Due to its severe cash and budget crisis, California recently announced that beginning February 1, it will delay issuing all income tax refunds for 30 days. The payment delay affects both individual and business entity returns for all refund claims not yet paid for all tax years.
The refund delay does not change the respective tax return due dates.
Currently, the refunds are only being delayed—that is, the State is not issuing IOUs in lieu of refunds. The State Controller will determine after the initial 30-day delay period whether the State will need to issue IOUs instead of refunds. If IOUs are issued, the State will issue paper IOU warrants to taxpayers, even if a taxpayer requested a direct deposit of the refund.
The State will pay interest on delayed refunds only if the respective refund is not issued within 45 days (for individuals) or 90 days (for businesses) after the original due date of the return or the actual date the return was filed, whichever is later.
Taxpayers may check the status of their tax returns by visiting www.ftb.ca.gov and clicking on MyFTB Account. The State indicated it will not notify taxpayers that their refund is delayed unless they determine IOUs are necessary.
As a result of this delay, we recommend that individuals and business taxpayers consider applying overpayments toward future tax liabilities instead of having the overpayments refunded. Being mindful of the estimated tax penalty provisions, taxpayers who follow this recommendation may be able to reduce future estimated tax payments or withholdings without incurring penalties.
For more information, contact your J.H. Cohn service professional at 877-704-3500.
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