New kicker screwup -- this one from Salem
Over the past couple of months, we've been bemoaning how weak the TurboTax tax return preparation program has been in handling last year's Oregon income tax rebate known as the "kicker." But it appears that Intuit, the maker of TurboTax, isn't the only one who let some people down. Even the Oregon Department of Revenue itself seems unable to get the "kicker" quite right.
The latest problem involves at least some of the reported 440 or so Oregonians who got their "kickers" late, based on their claim that their computerized tax return preparation software (including some others as well as TurboTax) erroneously donated their "kicker" check to the school fund without their knowledge. Many, if not most, taxpayers in this category have received, or are going to receive, their "kicker" checks in 2008. But at least one alert reader of this blog has received a "1099-G" form from the Oregon Department of Revenue that shows that he and his spouse were paid their "kicker" in 2007, which in their case isn't true.
It's more than a minor point. As noted here yesterday, if you itemized your deductions on your 2006 federal income tax return, chances are that you have to report your "kicker" as income on your federal tax return for the year in which you receive it. If you received it in 2007, you have to report it on your 2007 federal return, but if you didn't (or don't) receive it until 2008, it goes on your 2008 federal return, not 2007.
The 1099-G form that the reader received is the one that the state revenue folks are required to send to you and to the IRS (federal) if they issued you a tax refund. The whole point of it is to allow IRS computers and agents to make sure you report your state tax refund on your federal return if you are supposed to. And so if you get a 1099-G with "2007" written on it, the IRS will be looking for it (if they look at all) on your 2007 federal return. But if you didn't get your "kicker" until, say, January 2008, it doesn't belong on your 2007 return. As a "cash method taxpayer" (which almost all individuals are), you don't have income until you receive it.
In the case in question, the stub that the reader has off the "kicker" check itself shows that it was issued on January 23, 2008. And yet a 1099-G for 2007, which shows the "kicker" amount, has reportedly just now shown up in the taxpayer's mailbox. Sounds like a screwup to us.
Whatever you think about the wisdom of the "kicker" as a substantive policy matter, administratively it's a nightmare. The politicians who thought it up should be condemned. There are ways to credit taxes back to people besides issuing refund checks to them. Those other methods are much easier to administer. But they don't have the same political sex appeal, I guess, as checks. And so we shoulder on in the most inefficient way possible, all to pick up a few votes for some clowns running for re-election to the legislature. Such is what passes for governance these days.
And don't think we're through with this kind of foolishness. The feds are about to get into the act. Yesterday Congress passed a "kicker"-type federal tax refund that many people (but not all -- upper middle- and high-income folks are out of luck) will be receiving this spring. Will that federal refund have to be reported as income on your 2008 Oregon tax return? The jury is still out on that one -- it may depend on what happens in the regularly scheduled "special" session of the legislature, currently under way. In theory, though, since you will be deducting at least part of your federal taxes on your 2007 Oregon return, a rebate of federal taxes should be taxable in Oregon on your 2008 return, at least for some people.
One last note: Federal law requires that all 1099-G forms be in the mail by January 31. Like us, several readers of this blog didn't receive their 1099-G's from the State of Oregon until Wednesday of this week, which was February 6. Did the state itself miss the federal deadline? For shame.
UPDATE, 2/11, 1:12 a.m.: It turns out, everyone got a 1099-G showing the "kicker" -- even the folks who willfully donated theirs to charity. Ironically, if you donated, the 1099-G was probably appropriate, but if you didn't and got your check in 2008, it probably wasn't. More discussion here.