State forced to pay $2 million in interest to taxpayers

More than 278,000 Georgia taxpayers are receiving a little extra dough this week from the state.
The Department of Revenue has mailed out more than $2 million in interest to taxpayers whose refunds were not issued within 90 days of the April 15 filing deadline.
Delays in processing individual income tax returns led to the backlog, which Revenue officials say was caused by $12 million in budget cuts at the agency in the past year. More than 300 Revenue employees were laid off, many of them in the tax return processing unit.
Georgia law requires the state to pay interest on any return not processed within 90 days of April 15, or 90 days from the date the return was filed if after April 15.
The taxpayers receiving interest payments will get an average of $7.42, although 90,000 are receiving $1 or less. Some were $20 or more.
Under state law, the interest accrues at 1 percent per month after the 90-day limit. But the 90-day clock doesn't begin ticking until April 15, no matter when the taxpayer files a return. Any taxpayer who filed a return on time but did not receive refund before July 14 should receive an interest payment.
All taxpayers getting interest payments filed paper returns, and they should have already received their refunds, said Graham, who reports to Gov. Sonny Perdue. The interest is being sent out separately because the agency had to reprogram its computer systems to calculate interest owed. It's the first time since at least 2003 that the state has had to pay interest for late refunds.
But on six occasions during the past legislative session Graham warned lawmakers that budget cuts would result in processing backlogs. Graham said that proposed cuts would lead to an average three-month delay.
Lawmakers cut Revenue's budget by $12 million, or 9 percent. Of that, $2.4 million came from the processing center. Graham cut two of the three shifts of part-time processors hired during tax season.
Cagle also said in the interview that the state gave the Department of Revenue an additional $26 million "to create efficiencies of scale to process these much faster."
But that $26 million did not go to the processing unit. Much of it was bond money to create a new data warehouse that eventually will make it easier and more efficient for Revenue agents to investigate fraud. Some was for an ongoing project aimed at making it easier for sales tax and employers' withholding taxes to be filed and paid electronically.Perdue defended the agency. Bert Brantley, the governor's communications director, said the Revenue Department has recovered more than $500 million in recent years through improved operations and new ways to collect back taxes.
"Our goal is always to meet those higher expectations," Brantley said. "We regret it any time we don't reach that goal, even when it is due to budget cuts."