The Division of Administration is telling more than 66,780 Louisiana taxpayers who received duplicate tax refunds to sit tight for the time being while the state collects the overpayments directly from the banks to which they were deposited.
The $26 million mistake made local television news programs across the country – often to much mirth – as well as on national news outlets like CNN and CBS.
In the meantime, the Division of Administration is electronically trying to recoup the second individual income tax refund that was mistakenly sent out on Wednesday.
Commissioner of Administration Jay Dardenne told The Advocate Friday he didn’t yet have a good handle on how much money had been recovered or how long it will take. But, as taxpayers are going to be responsible for returning the overpaid refunds, he asked those impacted to be careful.
“There is no need for the taxpayers to take any action as the department works to recover the overpayment of funds directly from their bank accounts,” Dardenne said. “With the cooperation of several financial institutions, the process is working.”
A processing error led to 66,000 Louisiana taxpayers receiving second state income tax refunds, according the Division of Administration.
Louisiana has 2.14 million taxpayers, so the computer glitch effects about 3 percent of the filers.
The state began collecting individual income tax returns on Jan. 23. The filing deadline is Monday, May 15. Returns filed electronically take up to 60 days to process and get refund out. Paper returns can take up to 14 weeks from filing to return.
On Tuesday, the computer ran a file that directly deposited to taxpayer bank accounts or issued a debit card for 66,780 individual income tax return refunds. Then the file ran again on Wednesday, sending out duplicate refunds.
“It wasn’t a human error. The system simply failed,” Dardenne said. “Nobody is going to be punished.”
Basically, the computer program is supposed to archive the file once the refunds are distributed, then start to work on the next file. But this particular file didn't transfer, as it was supposed to do automatically, and wasn't archived Tuesday night. It was first in the queue Wednesday morning and ran again.
Division tech personnel are unsure just why this happened. It could be that the computers are handling so many returns now and the machines are running so late into the evening.
Tech personnel noticed that the file they started the day with on Wednesday showed up on the logs as also having run after midnight and immediately stopped processing refunds to find out what had happened. In the meantime, bank officials – and a couple of taxpayers – noticed the double-payments in their accounts and called the Department of Revenue.
By Wednesday afternoon, the Division had fixed the software problem, set into place new procedures and began the task of electronically retrieving the funds.
The cost to the state is minimal because the technical folks already are working, this was just another task. And the flub didn't require new equipment or extensive reprogramming, Dardenne said. The personal information of individual taxpayers was not released publicly.
A new procedure was instituted to ensure this didn't happen again. From now on, a Division employee and a Revenue staffer will have to independently sign off once a file of tax returns has run and has been archived. Only then can the next file start the process of delivering refunds.
The vast majority of the $26 million in overpayments are expected to be recovered electronically. Dardenne is not sure how long that will take.
Once the Division of Administration recovers all it can electronically, the remaining taxpayers will get a letter from the Department of Revenue with repayment instructions.
After 30 days, if not the state is not repaid, a bill will be sent. At that point the account would fall under the Revenue’s normal collection procedures, which includes penalties and interest, but also allows for the possibility of entering into an installment arrangement that would allow the taxpayer to pay back over time, said Byron Henderson of the Louisiana Department of Revenue.