Posession is 9/10 the Law
February 18, 2010
It is an old saying, but one that New York State is now considering. The idea is to delay tax refunds in an effort to pay off part of the NYS $1.4 billion deficit by April 1, the state's fiscal year end. This will provide short-term relief to the state, allowing them to retain funds they owe to tax payers until its next fiscal year.
This is all about managing cash flow. Legally, New York has until June 1 to issue refunds before it has to pay interest on the money. On the New York State government website, it boasts that 84% of refunds are processed within 30 days of receiving an income tax return and New York has already paid $293 million in refunds so far. But the state has a cap of $1.75 billion that can be used for tax refunds before March 31 and under this new provision the number will be lowered to $1.25 billion, causing many refunds to take longer than 30 days.
This new proposal is not expected to affect refunds in New York already filed. While no official determination has been made, New York is not the first to think about this option. North Carolina and Hawaii have already announced that they will be taking longer to issue refunds and this marks North Carolina's second year using this tactic to cover their budget shortfalls before fiscal year-end.
It is not certain that New York State will defer refunds, and the effect on most people will be a timing/cash flow issue. We work with our clients and prepare year-end tax projections and related planning to minimize and avoid overpayment whenever possible.
For further information, contact your PerelsonWeiner partner