Auditor Galloway finds increasing number of taxpayers receiving late tax refunds

Administration paying other bills ahead of individual refunds due to state's lack of cash
January 8, 2018

JEFFERSON CITY, Mo.--Missouri State Auditor Nicole Galloway today released an audit of the timeliness of income tax refunds by the Department of Revenue that revealed refunds to taxpayers have been increasingly delayed at the direction of the Department of Revenue and the Office of Administration. Auditor Galloway issued the report despite unprecedented attempts by the current Governor's administration to obstruct audit work.

The audit found the reasons for increasing delays in issuing refunds was due to the administration paying other state expenses before paying taxpayers' refunds. Additionally, the state's decreasing cash balance results in less money to pay Missourians what they are owed.  The number of late refunds has increased over the last several years, but worsened in 2017 with 155,000 refunds paid with late interest, an increase of 86 percent. That is in addition to the number of refunds paid late with no interest, which was at least 400,000.

"The administration is balancing its checkbook on the backs of individual taxpaying Missourians - that is simply unacceptable," Auditor Galloway said. "Throughout this audit, my office received thousands of calls and e-mails from taxpayers who were rightfully frustrated because they were not receiving the money they were owed. "

For example, the audit found at one point during the 2017 tax season, the Department of Revenue had $200 million worth of refunds processed and ready to be paid to Missourians, but the Office of Administration directed the Department of Revenue not to pay the refunds because other spending priorities came first.

The report found taxpayers pay a significantly higher interest rate when making late tax payments than the state is required to pay on delayed refunds, and taxpayers are not compensated for late refunds unless interest exceeds $1. For instance, a $250 refund would not include an interest payment paid by the state until it was a year late. Alternatively, if a taxpayer is late paying tax to the state, they are charged 4 percent interest and a 5 percent penalty.

The Department does not necessarily pay refunds in the order in which they are received and as a result, is selectively paying larger returns to avoid large interest payments.

Throughout the audit process, auditors faced repeated delays and unwillingness by the administration to provide the requested documentation. Last spring, Auditor Galloway issued a subpoena in order to obtain information on the state's management of income tax refunds. At the conclusion of the audit, the administration refused to provide the standard written assurance it had not withheld relevant information from the audit staff and had disclosed all provisions of laws, regulations, contracts, and grant agreements that the agency believed would have a significant effect on the audit.  

"As this audit shows, my office will not be deterred from protecting taxpayer dollars by a lack of cooperation from the administration or government secrecy trying to hinder our work," Auditor Galloway said.

The complete audit can be found here.

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