Last week, on the 20th of January, some 30,000 taxpayers of the state of Georgia were a bit happier after receiving $12 million in tax refunds via direct deposit from the Georgia Department of Revenue.
Not long afterwards, however, those same taxpayers were complaining that the refunds had mysteriously vanished from their bank accounts, and no one seemed to be able to tell them why.
On the 25th of January, the Department of Revenue finally issued a statement that it:
"... became aware of a computer system error in the calculation of refunds. To ensure that correct payments were made to taxpayers, the Department issued a 'stop payment' on those refunds. Due to the computer error, any funds deposited with a taxpayer were rescinded and returned to the Department."
The Department said in another statement it would begin reissuing refunds with the correct amounts by the 27th of January and this process would take seven days to complete.
However, between the initial issuance of the tax refunds and the rescinding of said refunds, many Georgians had already spent part or all of their refund checks. When the stop payment order hit, these folks found that they were being assessed bank over-draft charges for having insufficient funds in their accounts, this story in the Atlanta Journal-Constitution reported.
To say that the affected taxpayers were angry is to understate the situation by a wide mark, especially since the Department of Revenue didn't let anyone know what it was doing. In fact, the Department issued the stop-payment order days before it issued any public notice of what it had done, and only after the press demanded answers about what the heck was going on.
Revenue Commissioner Douglas J. MacGinnitie, who was only appointed on the 18th of January, was quoted in the AJC article as saying:
"Clearly, we need to work to make the Department of Revenue more customer-focused."
Commissioner MacGinnitie went on to apologized for the fiasco.
The AJC story says that the total amount of the over-payment error was $640,000 (one wonders if the state would have moved as quickly if it had discovered an under-payment of $640 K).
The Department of Revenue also did not indicate how many of the 30,000 or so tax refund checks were wrong - was it a couple hundred, a couple of thousand, or were all off by twenty-dollars or so? And why is it taking seven days to re-issue the refunds if it was a simple programming calculation error? And did the error affect paper refund checks as well?
The AJC story goes on to state that the Department of Revenue workers didn't know that the electronically deposited tax refunds had actually reached taxpayer bank accounts before they issued the stop payment order three hours later.
I am very curious about how the tax refund programming error was detected. What seems clear is that the programming error was found mere minutes after the tax refunds were sent out. What indicated that the refund amounts were wrong, and why wasn't it detected before the refunds were approved to be sent out?
What is also interesting in that the AJC in this story and other news stories reported that many Georgians had access to their (incorrect) refunds for several days, before the refunds simply vanished out of their accounts. Given that the Department of Revenue's stop payment order came only three hours after the refunds were electronically sent out, maybe someone can explain why it took so long for the banks to process the Department's stop payment order.
Anyway, the Department of Revenue says that folks who were assessed overdraft charges by their financial institution can get the charges reimbursed. However, to do so - you guessed it - they and their financial institution have to fill out a government form (see PDF here) by the 14th of February.
The Department of Revenue didn't say how long it would take to get the overdraft charges paid nor how much the fiasco is likely going to cost the state, either.
Robert N. Charette is a Contributing Editor to IEEE Spectrum and an acknowledged international authority on information technology and systems risk management. A self-described “risk ecologist,” he is interested in the intersections of business, political, technological, and societal risks. Charette is an award-winning author of multiple books and numerous articles on the subjects of risk management, project and program management, innovation, and entrepreneurship. A Life Senior Member of the IEEE, Charette was a recipient of the IEEE Computer Society’s Golden Core Award in 2008.