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Some Virginians get $5M tax windfall due to programming error

A programming error meant the state Department of Taxation sent $5.6 million of tax rebates promised in the current budget to people who missed the November deadline.

The department is not going to ask them to return the money, communications and training director Heather L. S. Cooper said.

The post-deadline rebates account for about 0.5% of the $1.06 billion of rebates the department issued.

Those rebates, which Gov. Glenn Youngkin called for during the 2021 election campaign and that former Gov. Ralph Northam included in his final proposed budget, amounted to up to $250 for individual filers and $500 for couples.

The amount varied depending on how much state tax they paid and any debts that are deducted.

But to get the rebate, taxpayers were supposed to file their tax returns by Nov. 1, 2022.

The tax department said it would take up to eight weeks to process paper returns, and it disclosed the post-deadline payments in its most recent revenue report, which covered the current fiscal year through February.

That report showed tax refunds for the first eight months of the fiscal soared to reach a total of nearly $2 billion, compared with just under $661 million for the same period the year before.

Besides the $1.06 billion in rebates, this year’s total reflected increases in the standard deduction and an expansion of the earned income tax credit.

Even so, leaving those changes out, refunds were up nearly 19% for the year to date, suggesting that taxpayers’ income taxed through payroll deductions had climbed, while those filing estimated payments for other income, such as earnings from businesses, professional practices, farming or investments may have sent in more than they needed to, by and large.

There’s been a bit of a fad for rebates since the state launched its program as the state and local governments have seen revenues continue to soar.

The thinking is that the possibility of recession, and more recently, financial market turmoil after the failure of two large out-of-state banks, might mean that cutting tax rates could leave governments short of funds to pay for public services. A one-time rebate gives taxpayers a break while giving governments some flexibility to cope if the economy slows.

In Richmond, the mayor and a majority of the city council agreed in December to a one-time rebate of real estate taxes equivalent to 5 cents per $100 of assessed value as an alternative to cutting the real estate tax rate in response to an unexpectedly large 13% surge in real estate values.

A one-time rebate was one stalled proposal to narrow the $1 billion gap between the state Senate and House of Delegates about taxes as part of this year’s budget amendments.

House budget negotiators proposed that rebate part of $900 tax reduction they floated.

Senate budget negotiators balked however.


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