The 2025 tax season began with the same anticipation as always: millions of Americans waiting for their refunds, which, for many, represent the most significant extra income of the year. But in several parts of the country, that wait is taking longer than expected, and the reasons range from budget cuts to an unprecedented political battle in the nation’s capital.
The root of the problem has a name. President Donald Trump’s tax package, passed in 2025, introduced a series of new deductions for middle-class workers: an additional deduction for senior citizens, the elimination of the tip and overtime tax, and a deduction for interest on new car loans. These changes, on paper, benefit millions of taxpayers, but in practice, they are creating quiet chaos in state tax systems.
Five Places Where Tax Refunds Are Being Delayed
The problem is that each state has its own forms, its own computer systems, and its own legislative process for deciding whether to adopt or reject federal changes. And that takes time. A lot of time. “State tax compliance will be the biggest hurdle, as some states adjust, some don’t, and some only partially” to Trump’s new tax laws, said Richard Pon, a certified public accountant in San Francisco.
Idaho was one of the first to sound the alarm. Governor Brad Little didn’t sign the bill to align with federal tax laws until February 11, weeks after the IRS opened tax season on January 26. By then, more than 158,000 state residents had already filed their taxes. The result was a deluge of returns that Idaho’s system wasn’t prepared to process under the new rules.
Your State Might Still Slow Down Your Refund
But that wasn’t all. In an internal memo, Lori Wolff, administrator of the state’s Division of Financial Management, warned that budget cuts had reduced the temporary staffing allocated for tax season, which would slow processing by 12 to 24 weeks and delay refunds by up to six weeks. The cost to taxpayers, Wolff estimated, could reach $7 million in additional interest payments.
“Changes to forms and systems typically take the Tax Commission nine months to complete,” acknowledged Jeff McCray, chairman of the Tax Commission, in a statement on February 17. “However, it is a priority for us to make the updates and provide a plan for taxpayers to follow as soon as possible.”
In New York, the problem originated in the private sector. A software glitch in Intuit TurboTax, which was supposed to be fixed by February 4, generated massive complaints from users on forums and in local media. The error reportedly prevented some taxpayers from filing their returns correctly, putting their refunds at risk.
Oregon Is Also in the Same Situation Cause by the IRS
Oregon, meanwhile, is facing delays for more technical than political reasons. Oregon’s Department of Revenue reported that paper returns won’t even begin processing until the end of this month, and the first refunds won’t arrive before early April.
The reason: the IRS was late in providing the forms and information Oregon needed to program its own systems. In addition, the department discovered that a small number of taxpayers claimed incorrect amounts of the Oregon Kids Credit due to a form error, and warned that it will adjust the returns of those who claimed that credit along with the new federal deductions for overtime, tips, and car loan interest.
SC Is Warning Residents to Double-Check Their State Returns Now
South Carolina has also sounded the alarm. On the state Department of Revenue’s website, officials warn that processing is taking longer than usual because the state chose not to comply with Trump’s new tax laws.
This requires taxpayers to manually amend their state tax returns to include income that was previously deducted at the federal level, such as tips, overtime, or senior citizen deductions. Those who do not make the adjustment may be required to file an amended return, further lengthening the wait.
60,000 DC Residents Should Also Check Their Tax Returns
The most extreme case, however, is in Washington, D.C., where a political dispute between the District and Congress has turned tax filing into a legal battleground. The District voted late last year not to comply with the new tax laws, but Congress voted to reverse that decision in the middle of tax season. Trump signed it into law on February 18. “Electronic and paper versions of the 2025 District income tax forms will be delayed,” the Bureau of Revenue announced.
The District Attorney filed a legal opinion arguing that Congress’s reversal is invalid because the deadline for such a move had already passed. If the dispute is not resolved soon, District Finance Director Glenn Lee warned that filing deadlines could be extended into September and destabilize $400 million in the District government’s cash flow.
Nearly 60,000 taxpayers who have already filed their returns may have to refile, according to the National Taxpayers Union Foundation. The impact also extends to the standard deduction: if Congress wins, it would be $15,750; if the District wins, it would be $15,000. And the local dependent child credit would be either zero dollars or $420 per child, depending on who prevails in this unprecedented showdown.
