New Jersey delaying income tax refunds until March
New Jerseyans who may be eager to get income-tax refunds from the state will have to be patient, as none will be issued until March.
The state Treasury Department revealed the delay in a notice on its Division of Taxation website. A spokesman says the state needs to start issuing refunds later so that it can share data with other tax agencies as its steps up anti-fraud efforts.
Refunds will start to be issued March 1. Tax returns filed electronically make take a minimum of four weeks to process. Paper returns may take a minimum of 12 weeks.
Treasury Department spokesman Willem Rijksen said tax-refund fraud perpetrators get more adept every year, so anti-fraud initiatives must be revised. New Jersey is among a group of state and local governments collaborating with the IRS to combat identity theft and tax fraud, he said.
“To take full advantage of that collaboration, New Jersey needs to coordinate deadlines for data sharing,” Rijksen said. “The later start will allow New Jersey to receive and share more data with other government tax agencies and is consistent with the refund start for other states.”
Ann Vardeman, program director for New Jersey Citizen Action, which offers free tax preparation services to households earning $54,000 or less, said refunds on February tax filings used to be paid in as little as two weeks.
“That sounds like a much longer review. It sounds about twice as long as what we’ve seen in the past,” Vardeman said of the 4- to 12-week processing for tax returns.
Vardeman said people who file early are typically those who need the refunds most urgently, in particular those with incomes low enough to qualify for the earned income tax credit – which can be as large as $6,269 from the federal government and $2,194, or 35 percent of the federal credit, from New Jersey.
Enhanced anti-fraud efforts at the IRS will delay tax refunds for people claiming the EITC or an extra child tax credit until late February, Vardeman said.
“I just really think that it’s disappointing to target people who are most in need of extra funds right now, to delay their funds,” Vardeman said.
Preventing tax fraud and identity theft are by no means a bad thing, said Jon Whiten, vice president for New Jersey Policy Perspective. But he said the state has been doing that since 2010, which he said has led to “lots of delays for lots of people.”
“This seems like it’s possibly being put on top of that, which really sort of adds insult to injury for half a million working families in New Jersey,” Whiten said.
Whiten said it is a misconception that there is widespread fraud in programs such as the EITC. He said his organization is concerned that the fraud review process might prevent eligible people from getting the credit because the state doesn’t hear back from a taxpayer.
“Low-income taxpayers often rely on places that might not be around a few months later – sort of those pop-up, H&R Block-type places in a strip mall or something,” Whiten said. “You can’t go back there and say, ‘I got this letter from the state government telling me I need to provide more information. Can you help me through that?’ It’s not like they have tax accountants.”
Vardeman worried it would be unfortunate if people strapped for cash turn to costly alternatives, instead of waiting the extra weeks or months for their EITC-enhanced refunds.
“One of our concerns is that people, if they find that out, will go and spend money at one of the tax filers instead of going to a VITA (Volunteer Income Tax Assistance) site or filing it themselves, and get a tax refund loan and then have to pay interest on that,” Vardeman said.