California Tax Refund IOUs

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Due to the state’s persistent cash and budget problems, California State Controller John Chiang announced on January 16, 2009, that he will have to delay refunds for 30 days starting February 1, 2009, for Personal Income Tax and Business Entity taxpayers.

If you were counting on receiving a refund early this year, I can recommend some strategies to assist you. If you have withholding from a paycheck, we can file your 2008 return, apply any refund to your 2009 taxes, and adjust your current withholding downward temporarily. In this way, you can “receive” your refund through increased net paychecks over the next few pay periods.

If you choose to wait to receive your refund when the state can begin making payments, I recommend direct deposit to speed your refund when funds are available. Alternately, if you believe the state budget crisis will extend for a prolonged period, but that the state will begin issuing “IOU” warrants, you might find out if your bank will honor these warrants. In the past, banks have cashed California warrants and then collected the funds from the state when available.

Whatever you choose, I also recommend that you let your state legislators know your thoughts about the current state of California’s finances and budget. In your phone book you’ll find a list of contact information for your local members of the California Assembly, California Senators, and Governor Arnold Schwarzenegger.

Thank you for being a client and for your ongoing support.