TAX NEWS - June 2010

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Colorado Tax: Delays in state refunds taxing some Coloradans' patience

Some Coloradans have reported lengthy and mysterious delays in receiving their state income-tax refunds, although statistics show all but a fraction of the 2008 and 2009 returns were processed within the 45 days required by state law.

Denver accountant Rick Higgins said a half-dozen of his clients have waited months to receive refunds, including one who's been expecting $337,000 since October.

The cause of the delays remains unclear, because state Department of Revenue officials are barred by law from discussing income-tax returns with anyone other than individual taxpayers or their attorneys.

The Colorado Society of Certified Public Accountants has fielded more calls than usual from members reporting delayed refunds this year, said Mary Medley, a society official.

But she's cautious about speculating why that may be and pointed out the Revenue Department has helped her quickly resolve problems as they crop up.

"There are all kinds of possibilities," Medley said. "I can't tell you why it's happening."

Of the 1.5 million people who were due a refund on their 2008 tax returns — a number that includes some of Higgins' clients — about 99.9 percent received their cash back within 45 days, according to Department of Revenue spokesman Mark Couch.

Ninety-six percent of 1.5 million Coloradans waiting for tax refunds this year received their money within the same time frame, he said.

State law requires the Revenue Department to process tax returns within 14 days if filed by Jan. 31 and within 45 days if filed after March 31. After the deadline, the state must start paying 5 percent interest and penalties.

The state has paid out $27,314 in interest on 1,236 late refunds this year, he said.

"(A delay) would not be because they fell through the cracks. It would be because there is something about the return that would cause us to take a look at it," Couch said. "It all depends on the individual circumstance."

In the 35 years that Higgins has prepared taxes, this is the first time he's run into delays of this scope and frequency, he said.

In the case of the man owed $337,000, Higgins was granted power of attorney and said he's called the state's tax preparers' hotline at least a half-dozen times since January asking about the refund, filed in October.

He's been told the return is still waiting to be reviewed and that the department is short-handed, he said.

"All I've got is 'call back in the next month' and no solution," Higgins said. "I don't know if this is a way of the state handling their budget deficit."

The state temporarily stopped processing returns in September and October as it switched to a more modern computer system, although Couch said that backlog was almost entirely addressed by the end of November.

The delays come as the state faces financial duress. The state Tuesday declared a fiscal emergency in order to temporarily postpone Medicaid reimbursements to doctors and clinics in order to deal with a revenue shortfall.

But the fiscal emergency doesn't extend to the state Revenue Department, said Couch, who pointed out it would cost the state money to delay refunds.

"We do not delay refunds to help with a fiscal emergency," Couch said. "In Colorado, you'd have to change state law so we wouldn't be paying penalties and interest."

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