DRS: Error Affecting Some Resident State Income Taxpayers Being Corrected

Source: www.ct.gov/drs

March 18, 2016

Hartford – Connecticut Department of Revenue Services (DRS) Commissioner Kevin Sullivan issued the following statement. 

“Late Thursday, DRS discovered that certain information provided to some resident income taxpayers claiming property tax credits was in error. The error does not affect single filers claiming a property tax credit but does affect some other filers claiming the credit. As a result, about 7% or approximately 120,000 of all resident income tax returns processed to date may have resulted in a higher credit to their tax liability. 
When we make a mistake, we own it and fix it immediately. In this case, we did not correctly inform taxpayers of the additional phase down of the property tax credit enacted by the General Assembly in the 2015 legislative session. This year the DRS will process 1.6 million resident state income returns and while this affects a relatively small number of income taxpayers, I apologize for our error and the inconvenience to those taxpayers. 
Affected taxpayers who have already received refunds or whose tax payments were completed before the error was discovered will be notified in writing by DRS. Those with a resulting underpayment will be billed without penalty or interest for the balance. Those who already received a refund will be given the option of making repayment now or as an offset when filing for the next tax year, also without penalties. Those whose returns were not processed prior to March 17th will either receive a reduced refund or notice of additional tax to be paid.” 

Additional Background and Information: 
The Department of Revenue Services has discovered a miscalculation in the Property Tax Credit applied to the resident Personal Income Tax. For certain filing statuses in the 2015 income tax year, it is anticipated this miscalculation has resulted in about $11 to $12 million in underpayments of personal income taxes across fewer than 7% of income taxpayers. 
As part of the biennial budget, there was a change to the Property Tax Credit as it applies to the Personal Income Tax, which reduced the income thresholds at which the credit would begin to phase-out for all filing statuses. That was due to take effect on July 1, 2015 and apply to the 2015 income tax year.

However, DRS’ system was only applying the change to the resident Property Tax Credit to individuals filing as Single. As a result of this miscalculation, individual taxpayers who file with the statuses of Married Filing Joint, Married Filing Separate, Qualifying Widower and Head of Household, who fall within the affected income thresholds, would either be underpaying or filing for refunds in amounts higher than they should have received. The Department of Revenue Services has stopped processing income tax returns that fit this criteria until the error is fixed.