So what do I do with an IOU?

I thought that I was filing taxes early when I did it this week, but apparently the cutoff for IOUs from California was the 1st. Dammit.

(I’m not depending on this money the way other people are.  Our news channel seems to like interviewing people who were counting on their refunds to pay their bills.  I’m a big fan of refunds, but if you can’t pay your bills, you need to scale back your withholdings!  Fill out a new W4 and get the money in your pocket now.  It’s a fun savings trick, but you shouldn’t be relying on that money.

Of course, I understand that some people might enjoy the windfall so they set up their withholdings way back last January, only to lose their jobs and have no money available for bills.  Which is why I hug my emergency fund every day.)

So my question is, what the hell do I do with an IOU?

Short answer is nothing.  I’ve heard stories that sometimes banks will cash IOUs as if they were real checks, but nothing yet about how they’re planning on handling it this year.  My understanding is this issue stems from an inability to agree on the state budget, not that California will shortly be begging for change at freeway exit ramps. We’re bound to get the money sometime.

The good news is that Californians will get interest on the IOUs.  Maybe up to 5%.  (Shit, that’s better than my ING accounts!  Can I give them some extra money to hold there too?)

And if you owe the state of California, of course you have to pay it.  The blogosphere is full of people wailing about how they are going to give IOUs in lieu of paying what they owe.  Um, it doesn’t work that way. The payment of refunds has nothing to do with the fact that we all have to pay taxes.  Except I paid mine and now you don’t want to pay yours.  Yes, that seems fair – oh wait, no, I meant the opposite of fair.   In fact, you should pay what you owe sooner rather than later so we’re all equal and have less money for equal amounts of time!

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3 Responses

  1. I never understood how some people are ecstatic when they get a huge refund check. I keep wanting to ask, “Didn’t you just lend the State interest-free money for a year??” Anyhow, I usually owe the state due to stock sales, not because of under-withholding. (Well… actually, there may be some under-withholding, but not much.) This is the first time I’m ever glad that I owe money to the State. And, I’m not gonna pay it a day earlier than April 15!

  2. @ shtinkykat: I confess, I am one of Those People who loves getting a refund. The psychological boost from the windfall overrides my logical knowledge that I’d have that money anyway. I didn’t expect mine to be quite as big as it was – I checked on the IRS website and it told me I’d only be getting back like $200. I guess I had more itemizable things than I thought!

    Just kidding about paying your taxes early, of course. I’d wait, too.

  3. I’m with Kat, I owe about $150 to the state and I’m holding off to the bitter end. I need to get my federal done though cause they owe me. Hopefully the banks will decide to accept them, if you need/want the money. But in their sour shape they may not!

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