Tax refund delay: 53,000 state income tax refunds delayed

If you filed your taxes and you are expecting a refund, you may have to wait if you live in Rhode Island. Your state refund may be delayed and there's not much you can do about it.
When will you get your Rhode Island state tax refund? The state expects that all refunds will be paid by the end of the fiscal year.
Bottom line, the cash flow in Rhode Island is just not flowing.
So, if you need that tax refund money to repair something in your home or pay some bills, you might want to practice a little patience.
Right now, $36.3 million in refunds owed to 53,000 Rhode Islanders, so get in line.
If you need an idea how far behind the state is running when it comes to getting you the cash you're owed, a batch of 18,577 refunds that were processed and ready to be issued on April 26 have not been distributed yet. There are also weekly batches from May that have been held.
The state has 90 days, by law, before it has to pay interest on the late refunds. However, several legislators just introduced a bill that would force the state to pay interest sooner than the law states on delayed refunds.

State to start sending tax refund checks this month, Lingle says

Improved tax collections will allow the state to start paying out tax refunds earlier than July 1, Gov. Linda Lingle announced today.
Taxpayers who filed returns in January and February can expect refunds later this month, she said.
Refunds for taxpayers with direct deposit are to begin May 21, those expecting refund checks can expect them by May 28.
Lingle previously had said the state would withhold refunds until after the start of the new fiscal year July 1 in order to save $275 million to balance the budget in the current fiscal year

Swan 'ticks the box' on tax return reform

The Federal Government expects 6.4 million Australians will save time and money on their tax returns by claiming a standard deduction for work-related expenses.
In a belated but widely anticipated response to one of the Henry tax review's recommendations in the 2010 budget, the Government will offer the option of a $500 standard deduction for workplace expenses in 2012-13, increasing to $1,000 the following year.
It estimates the average tax bill of the Australians who choose to take up the offer will drop by $192, while people with higher work-related deductions can choose to continue filling out an individual claim.
Treasurer Wayne Swan said the move would allow taxpayers to "throw away shoeboxes full of receipts" and simply "tick the box".
The budget estimates show the Government expects to be $608 million worse off in the first year the $1,000 deduction comes into effect.
"This means less time with the Tax Pack, more time with loved ones, and for 6.4 million Australians it also means a bigger tax refund," Mr Swan said in his budget speech.
Interest discount
The other main change to personal taxation is a 50 per cent tax discount on the first $1,000 of interest income earned from July 1, 2011.
The Government says around 5.7 million taxpayers will benefit from the measure in the first year of its implementation, particularly low and middle-income earners.
The discount will apply to interest earned on deposits, bonds, debentures and annuities and is forecast to cost $516 million in lost revenue in the first year after its introduction.
The Government has also responded to strong criticism of its First Home Saver Accounts, which have fallen well short of the take-up originally expected.
One of the main drawbacks of the scheme was that account holders had to save for at least four years before being able to access their funds to buy a house - if they bought within four years the balance of their accounts would be rolled into their superannuation.
Under the changes, account holders will still not be able to access their funds for at least four years but can then put them towards their mortgage if they buy a house in the interim rather than having them tied up in super.
Treasury is expecting this rule change will roughly double the take-up of the scheme, which only cost the Government $12 million this financial year but is expected to cost $23.6 million next year.

Five minute fix: check your tax code

The Inland Revenue has recently come in the firing line for sending out the wrong tax codes to employees. If you have changed jobs or had an extra payment this tax year you may be classed as having had a pay rise even if that was actually a one-off payment. You could therefore be paying way too much extra tax.
What does the code mean? The number that shows how much money you can earn before paying tax and the letter that shows your tax status. For example 647L means you are a straightforward basic rate taxpayer.
Where can I find it? It will be on your pay slip, PAYE Coding Notice, form P60 (year end) or form P45 - you get this when you leave a job.
Check the Inland Revenue’s website (www.hmrc.gov.uk/incometax/codes-basics.htm) to understand the different letters and numbers that make up your tax code.
What if I have lost my P45? Your employer will have to use an emergency code and if you have paid too much tax under the emergency code, you will get a refund. If you want to find out your tax code then contact your Tax Office and give them your National Insurance number and tax reference number.
What information do I need to supply to the Revenue? If you start to receive a second (or third or more) income or the amount of untaxed income you get increases or reduces.
Contact the Tax Office which deals with your tax affairs – you will find the number at the top of your tax form.
What about taxable perks? Some company ‘benefits’ or perks - such as medical insurance or a car – are taxable and are usually included in your tax code via PAYE. If you start receiving these perks it is better to tell the Tax Office straight away so that the extra tax can be collected monthly.
Otherwise the Revenue will only know at the end of the tax year when they are notified by your employer and you will end up with a big one-off tax bill.

IMF urges double tax hit on banks to refund taxpayers

Banks should be slapped with two unprecedented taxes in order to compensate taxpayers for the billions of pounds lost in the financial crisis, the International Monetary Fund has recommended.
In a report delivered to G20 nations on Tuesday, but yet to be published, the Fund has urged countries around the world to impose two new taxes on financial institutions: a "financial stability contribution" which levies a small charge on their balance sheets, and a "financial activities tax", which taxes excess profits, including bonuses.
The recommendations are likely to strike fear into a banking sector reeling from the US Securities and Exchange Commission's fraud charges against Goldman Sachs.
If imposed by G20 governments, the Fund's proposals are likely to have a significant impact on the profitability of all financial institutions.
The IMF report recommended that the proceeds of the taxes should go towards both a fund to be used to repair the economic damage wrought by this and future financial crises, and towards general government revenues.
However, it did not rule out calls from various charities to put some of the cash towards development and environmental projects.
In what may be construed as a blow to the Conservatives, who have pledged to push on with a banking tax unilaterally if necessary, the Fund said that the tax ought to be imposed by as many countries as possible. However, the recommendations are likely to be seized upon by all the major parties, making their imposition extremely likely, according to insiders.
The Fund's report rules out a financial transactions tax – something marketed by campaigners as a Robin Hood Tax – as impracticable, and likely to cause economic damage by distorting flows of capital around the world. Its recommendation of a levy on balance sheets is not a surprise, although the imposition of this tax across the entire financial system rather than just banks, is more unexpected.
Few within the banking sector had anticipated that the Fund would suggest a second tax on financial activity – as revealed by Telegraph.co.uk earlier this month. However, the Fund said that a Financial Activities Tax, which is levied on banks' cashflow, would be the least distortionary way of raising money from banks.

State tax refund check's (almost) in the mail

When will you get that state refund check? Officials say state income tax refunds should arrive earlier this year than last year, when many state taxpayers complained of long delays.
They aren't saying that some delays won't occur, but Bill Newton, acting director of finance, said that this year returns are being paid earlier. A major reason for this is because the Alabama Education Trust Fund, where tax refunds are stored, is a little more flush with cash this year.
That fund depends heavily on state income tax collections.
A major reason for last year's long delays in the state sending out refund checks came down to simple human nature: people who are owed money by the state want that money quickly, while people who owe the state money are not in as big a hurry to pay it.
"Most taxpayers that are due a refund file earlier than taxpayers that are liable for additional payments," Newton said in an e-mail response to questions from the Montgomery Advertiser.
That means the fund often experiences requests for refunds before it has received the payments from other taxpayers that it needs to pay them
While that can be a problem any year, surprisingly, it was exacerbated by last year's major downturn in the economy, leading to far more people filing early.
Because more taxpayers had capital losses, which can be written off on tax returns, in 2009, more were scheduled to receive refunds and more filed early.
While officials from the Alabama Department of Revenue, the department that handles tax returns, and the Alabama Department of Finance, which actually mails out the refund checks, say delays are still possible, they say the sort of months-long delays some taxpayers suffered last year are unlikely.
Before finance can even think about paying a tax refund, the Department of Revenue must process the return. That process can take time in itself. Once the return itself is processed, Revenue sends a list of taxpayers owed refunds to Finance, and Newton says that department tried to cut the checks as swiftly as possible.
Even if the state pays the refunds on time, according to the law, many taxpayers will feel the refunds have been delayed because the law gives the department plenty of time to pay the refunds.
"If the refund has not been paid by the state within 90 days after the due date, state law requires interest be paid by the state,"
That due date is April 15, not the date that the tax return is received. That means a return filed by Feb. 15 and due a refund could sit for five months before that refund is paid.
Those rules only apply if the return is filed by the deadline and has no errors. If the taxpayer is late in sending in the return, seeks an extension or makes mistakes on the return, the state is allowed more time to mail out the refund.

(It's that time again): 5 myths about paying taxes

No one likes to pay taxes, but as we get ready to stand in line at the post office on the 15th, it might be useful to dispel some of the most common myths about this springtime ritual.
1. The poorest and the richest Americans pay no taxes
About 45 percent of households will owe no federal income tax in 2010, according to our estimates. Half of them earn too little, while the other half - mostly middle- and lower-income households - will take advantage of tax credits such as the earned-income credit, the child and child-care credits, the American Opportunity and Lifetime Learning credits, which help pay for college, and the saver's credit, which subsidizes retirement saving.
But even citizens who pay no income tax still pay other kinds of taxes. They pay Social Security and Medicare taxes when they work, sales taxes when they buy things and property taxes on their homes. Drivers pay gasoline taxes, and smokers and drinkers pay excise taxes on tobacco and alcohol. According to our research, more than 75 percent of us will pay at least some form of federal tax in 2010.
Those who pay no federal taxes are mostly the low- income elderly or very poor families with children. Even about half of those with annual incomes under $10,000 pay some federal tax, most often payroll taxes on wages.
And, yes, the richest Americans pay taxes, too. Though a tiny minority manage to avoid federal income tax through elaborate tax planning, 99.7 percent of those with annual incomes above $1 million will pay federal taxes this year, surrendering 27 percent of their earnings to the government. The average American taxpayer pays 18 percent.
2. Americans are overtaxed

In 2007, federal, state and local taxes claimed about $3.8 trillion, or 27 percent of U.S. gross domestic product. That's nearly $13,000 for every American. Two-thirds of tax revenue went to the federal government.
It may sound like a lot, but other developed countries collect even more. In 2006, taxes in 30 of the world's richest countries averaged 36 percent of GDP; only Mexico, Turkey, South Korea and Japan had tax rates lower than ours. And taxes in many European countries exceeded 40 percent of GDP because these nations offer more extensive government services than the U.S. does.
Americans do pay far more in individual income taxes than residents of other wealthy nations. Nearly 37 percent of U.S. tax revenue came from personal income taxes in 2006, about 10 percentage points more, on average, than in other industrialized countries. But we pay much less in sales taxes: 17 percent of 2006 U.S. tax receipts were from taxes on goods and services, or about half of the 32 percent average for rich countries.
Bottom line: We may hate our taxes, but we pay far less than people in other wealthy countries.
3. Higher taxes could eliminate the federal deficit
Washington spends more than it takes in through tax revenue, resulting in a projected budget deficit of almost $1.35 trillion in 2010, or 9 percent of GDP, according to the Congressional Budget Office. Couldn't we get rid of the deficit by raising taxes?
No. A study we conducted at the Tax Policy Center found that Washington would have to raise taxes by almost 40 percent to reduce - not eliminate, just reduce - the deficit to 3 percent of our GDP, the 2015 goal the Obama administration set in its 2011 budget. That tax boost would mean the lowest income-tax rate would jump from 10 to nearly 14 percent and the top rate from 35 to 48 percent.
What if we raised taxes only on families with couples making more than $250,000 a year and on individuals making more than $200,000? The top two income-tax rates would have to more than double, with the top rate hitting almost 77 percent, to get the deficit down to 3 percent of GDP. Such dramatic tax increases are politically untenable and still wouldn't come close to eliminating the deficit.
4. Most people's tax returns are way too complicated
No one claims that USA tax system is simple. After all, the Internal Revenue Code runs more than 3 million words, and the instructions for the widely used 1040 form take up more than 100 pages. Small wonder that three out of five tax filers pay someone to prepare their returns and that one in five uses software.
But most Americans have relatively simple tax returns. Nearly two-thirds of us claim the standard deduction and don't have to itemize our deductible expenses. And 40 percent of us file one of the simpler tax forms: the 1040A or the 1040EZ. The 2009 EZ has just 13 lines. Relatively few of us get income from any source besides wages and salaries, interest, dividends and pensions.
So, why do taxes seem so complicated? Blame Congress. Legislators use the tax code not just to collect revenue but to encourage and reward specific activities. The 1986 Tax Reform Act greatly simplified the income tax by getting rid of many special provisions and cutting the number of tax brackets. Since then, Congress has expanded the earned-income and child-care credits, created the child, saver's and education credits, established health savings and Roth retirement accounts, imposed different tax rates on dividends, created a class of long-term capital gains with a lower tax rate and doubled the number of tax brackets.
Last year's stimulus bill added temporary tax cuts that benefit house and car buyers, workers, and families with children, but it also made tax returns longer and harder to complete.
5. You should aim for a big tax refund
It's wonderful to receive a big check in the mail. And having to write a check to the IRS is never fun. But you're better off owing the government a small amount on April 15 than receiving a huge refund. Here's why: Even though it seems like you pay your income taxes once a year, you actually pay them all year long as your employer withholds taxes from your paycheck. When you file your tax return, you are refunded the difference between the tax you owe and the cash your employer withheld.
Three-quarters of Americans allow their employers to withhold too much. Income-tax refunds averaged nearly $2,300 in 2008. In effect, we're giving the government an interest-free loan. You'd be better off stashing these withheld wages in an interest-bearing bank account and writing a check to the IRS on April 15.
It's not hard to cut the amount of money withheld from your paycheck. Just give your employer a W-4 form asking to withhold less each payday. Your human-resources office should have the form, and it's easy to fill out. But there is a catch: If you owe too much (and there are specific rules defining what "too much" is), you may have to pay a penalty - usually interest on the unpaid tax. And, if you're not careful, you may end up owing more in taxes than you saved.