Caution: Unless You Plan Properly, Your Refund Is Not as Close as It Appears

In prior years, it was a no-brainer that a state would automatically refund an overpayment reported on a tax return. These days, however, when state economies are struggling, it seems that some states, such as Illinois, have found a new way to balance their budgets. A state may simply refuse to issue a refund, leaving the taxpayer with merely a vague promise of future repayment. Although this article specifically addresses Illinois and its law, this situation may occur in other states as well.¹

Unfortunately, when a state refuses to refund an overpayment, the taxpayer is left with few options. Typically, the taxpayer's first reaction would be to request that the state apply the refund to next year's estimated tax payments. In fact, Illinois regulations explicitly permit taxpayers to "elect to have any portion of any overpayment shown on a timely original return applied against the taxpayer's estimated tax liability for the taxable year immediately following