Every year, tax refunds are often the largest single payment many Americans receive. However, in the 2025 tax season, residents in certain locations may need extra patience. Several states and Washington, DC have warned taxpayers that their state tax refunds could arrive later than usual due to administrative issues, staffing shortages, and confusion related to new federal tax laws.
A major reason for the delays comes from the tax and spending legislation signed by President Donald Trump, which introduced several new tax benefits for middle-class taxpayers. While the federal government implemented these changes, states must decide whether to fully adopt, partially adopt, or ignore these federal rules in their own tax systems. This process, called state tax conformity, has created complications for several state tax agencies.
According to Richard Pon, a certified public accountant in San Francisco, the biggest challenge for states is deciding how they align with the federal law. Some states follow the federal rules completely, some only partially, and others choose not to conform at all. These differences can slow down tax processing and delay refunds.
Why State Tax Refunds May Be Delayed in 2025?
The new federal tax provisions require states to update tax forms, software systems, and filing guidelines. These updates include provisions such as:
- Additional senior tax deductions
- No federal tax on tips and overtime income
- New deduction for auto loan interest
States that choose to follow these rules must update their systems accordingly. However, these updates can take months to implement, which is one of the main reasons refund processing may slow down in certain areas.
In addition, disputes between local governments and the federal government are further complicating tax administration in some jurisdictions.
States Warning Residents About Tax Refund Delays
Idaho
Residents in Idaho may face some of the longest refund delays this year. A memo from Lori Wolff, administrator in the state’s Division of Financial Management, explained that budget cuts reduced the temporary workforce normally hired during tax season.
Because of the staffing shortage:
- Tax processing could take 12 to 24 weeks
- Refund payments may be delayed by up to six weeks
Officials also estimated these delays could cost taxpayers around $7 million in additional interest payments on refunds.
Another issue is timing. Governor Brad Little signed Idaho’s bill aligning with federal tax law on February 11, after the IRS had already started the tax season on January 26. By then, more than 158,000 Idaho residents had already filed their taxes, creating additional complications for the system.
According to Tax Commission Chairman Jeff McCray, updating tax forms and software normally takes about nine months, but officials are working to accelerate the process.
New York
In New York, delays have been linked to a software problem involving Intuit TurboTax.
Reports from taxpayers and local news outlets indicated that the issue prevented some residents from filing correctly or submitting their returns on time. Although the software provider said the problem was fixed on February 4, some taxpayers may still experience delays in receiving their refunds.
Oregon
The Oregon Department of Revenue announced that taxpayers who file paper returns should expect slower processing.
Officials stated:
- Paper tax returns will not begin processing until the end of the month
- The first refunds may not be issued until early April
The delay happened partly because the IRS provided key tax forms and technical information later than expected, slowing the state’s system updates.
Additionally, the department identified a form error related to the Oregon Kids Credit, which led a small number of taxpayers to claim the incorrect amount. While officials said most refunds should not be affected, they may adjust some returns where taxpayers claimed both the Kids Credit and new federal deductions for tips, overtime wages, or auto loan interest.
South Carolina
The South Carolina Department of Revenue also warned taxpayers that refund processing is taking longer than usual.
Unlike some states, South Carolina has decided not to conform to the new federal tax rules. Because of this difference, taxpayers must adjust their state tax returns by adding back income deductions that were allowed at the federal level.
These adjustments may include:
- Tips income deductions
- Overtime income deductions
- Additional senior deductions
- Auto loan interest deductions
If taxpayers fail to make these adjustments, they may need to file an amended return, which can significantly delay the issuance of a refund.
Washington, DC
The situation in Washington, DC is particularly complicated due to a legal dispute with the federal government.
Initially, the District of Columbia voted not to follow the new federal tax laws. However, during the tax season, Congress intervened and overturned that decision. President Trump signed the reversal into law on February 18.
As a result, the DC Office of Tax and Revenue announced that both electronic and paper tax forms for 2025 will be delayed.
The controversy deepened when the DC Attorney General argued that Congress’s action may be invalid, claiming the deadline to reverse the decision had already passed.
If the conflict continues:
- The tax filing deadline in DC could be extended to September
- Around $400 million in government cash flow could be disrupted
Approximately 60,000 taxpayers who have already filed their DC returns may need to refile, according to the National Taxpayers Union Foundation.
The dispute also affects major deductions. Nearly 90% of taxpayers claim the standard deduction, but the amount depends on who wins the legal battle:
- $15,750 standard deduction if Congress’s decision stands
- $15,000 standard deduction if DC prevails
Similarly, the local child tax credit could either be:
- $0 per child if Congress is correct
- $420 per child if DC’s interpretation wins
Federal Tax Refund Trends in 2025
Even though some states are facing delays, the federal government has already distributed a significant amount in refunds.
By March 24, taxpayers had received $172.26 billion in federal tax refunds. However, that total is $16.4 billion lower than the same time last year, representing a decline of about 8.7%.
This reduction suggests fewer refunds or smaller refund amounts compared to the previous tax season.
While tax refunds remain an important financial boost for millions of Americans each year, the 2025 tax season has introduced several challenges. New federal tax provisions, staffing shortages, technical issues, and disputes over state tax conformity are slowing down refund processing in several areas.
Residents in Idaho, New York, Oregon, South Carolina, and Washington, DC should be prepared for possible delays. Tax experts recommend reviewing state filing requirements carefully and ensuring all adjustments are correct to avoid additional delays or amended returns.
Despite the complications, tax agencies continue working to update their systems and process refunds as quickly as possible.