Some states suffering severe, recession-induced budget problems are holding off on paying tax refunds to people and businesses.
North Carolina, Hawaii and Alabama are already doing it and others, such as New York and Kansas, might.
The states are holding or may hold onto your money as long as they can because they need to use it for other purposes, tax expert and attorney Barbara Weltman told "Early Show" Saturday Edition" co-anchor Chris Wragge.
You'll eventually get your refund, but when depends on where you live, she explained. Laws differ from state-to-state, but most states have to issue a check (or direct deposit) within 45 days from April 15 or the date the return was filed, whichever is later. So, if you filed your return in February, the refund isn't due until 45 days after April 15. Some states have even longer up to 90 days to issue the refunds without having to pay interest.
Weltman, who wrote "J.K. Lasser's 1001 Deductions & Tax Breaks 2010" (Wiley), says she sees this becoming a long-term problem because, even if the economy recovers, many states will have huge leftover budget gaps.
"I think the best strategy for tax payers is to avoid the need to get a refund which is really just an interest-free loan you've made to the government," she observed.
That means lowering how much you have taken out of your paychecks for taxes, and getting that money up-front, upping your take-home pay but shrinking or eliminating your refund, so you're not waiting for the government to issue the refund check.
Other ways Weltman says you can try to avoid being subject to the refund delays:
• If you're owed a refund, file as soon as you can. The states will likely process refunds in the order the returns came in. The sooner you file, the faster you'll get your refund, even with delays.
• Follow changes in tax laws enacted during the course of the year, on both the federal and state levels, because they could impact your withholding. For example, we may have a federal jobs bill soon, and it's almost certain to contain tax breaks.
• Work with a tax professional. He or she will help you stay abreast of what's happening and make sure you're not overpaying your taxes.
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