How are you going to spend your IOU?

It's income tax time. The early birds are getting their deductions in line and anxiously awaiting the arrival of the forms: W-2s, W-9s, 1099s and 1098s. Those involved in farming are already keeping their tax preparers busy.

All of this accounting is done in hopes of getting some of the money back that you have been sending to the federal and state governments. An entire cottage industry has arisen to take advantage of this potential economic windfall, with some firms offering to do your taxes and provide an advance on the refund to be used to purchase items in their stores.

Sales of organizational home office items, do-it-yourself tax programs and calculator tapes run high at this time of the year, all in hopes of getting that refund. Tax preparers will even arrange for your refund checks to be deposited directly into your savings or checking account.

It's an exciting time of the year. There's not a single person who couldn't use some extra money.

So imagine the joy of taxpayers in California, where there is an ongoing trench warfare type battle on the state's budget, when they files their returns and receive an IOU from the state instead of a refund check.

Yes, we couldn't make stuff like this up, especially in California.

Since there is no agreement on the budget and the state facing a potential $15 billion deficit, plans are being floated that tax refunds would come in the form of promissory notes as early as next month.

A similar situation occurred in California in 1992 when state employees were paid with IOUs and some taxpayers were issued commitments to be paid at a later date. During that budget impasse, banks honored the IOUs, but it's not clear whether they will do so this time.

We can't help but ask the question that has more than likely come to your mind: if it's OK for the state to pay refunds with IOUs, shouldn't taxpayers be able to pay their taxes in the same manner?

Let's hope that this California trend doesn't catch on anywhere else.