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The Honolulu Advertiser
Posted on: Sunday, April 11, 2010

Tax refunds on ice

By Dan Nakaso
Advertiser Staff Writer

Hawaii news photo - The Honolulu Advertiser
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Hawaii news photo - The Honolulu Advertiser
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"I count on that money every year for repairs and stuff like that maybe a nice dinner."

Hera Kainau, Wahiawa

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Hawaii news photo - The Honolulu Advertiser
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"It's definitely going to put a burden on my finances."

Shanna Toves | Mililani

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Hawaii news photo - The Honolulu Advertiser
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"Every little bit helps."

Jane Kutuzova | Mo'ili'ili

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Taxpayers still have more than a week to meet the April 20 Hawai'i income tax filing deadline, but it could take until early September before some of them see their portion of an estimated $600 million in state refunds.

Gov. Linda Lingle's plan to delay income tax refunds this year is intended to save $275 million in the face of a $1.2 billion budget shortfall.

Other states, such as California, Missouri and Kansas, are also delaying refunds to ease their own budget problems.

Hera Kainau of Wahiawā already received her federal income tax refund and yesterday wondered how many more months will pass before she sees the $1,000 she's owed by the state.

"I understand why she's (Lingle) doing it," Kainau said. "But it's still irritating. I count on that money every year for repairs and stuff like that maybe a nice dinner."

The cumulative effect of delaying everyone's state refunds will save the state money but will also serve as another temporary brake on Hawai'i's stuttering economy, said Leroy Laney, a Hawai'i Pacific University professor of economics and finance.

"We know the kind of pressure state government is under, but any time you take money out of the economy furloughing workers, delaying tax refunds that is a drag on the economy," Laney said.

"Once the money becomes available, you could see some sort of boost to the economy. But there is a delay, no doubt about it."

Hawai'i's Department of Taxation hopes to get the first refunds out to the earliest filers with automatic deposit by July 6 or July 7, said Joan Bolte, taxation services administrator.

"We're still working out the schedule right now," Bolte said.

Tax officials have until Sept. 2 to issue the last refund without having to pay interest, said deputy tax director Stanley Shiraki.

The first refunds will go to taxpayers who filed early with direct deposits, Bolte said. The last refunds will go to people who filed later and need a check to be sent, Shiraki said.


Tax preparers such as David Ramirez, owner of Tax Relief Services, have never seen the state delay refunds before. But Ramirez said he is already helping clients prepare for the same possibility next year and beyond.

Several of his clients already have adjusted their paycheck withholdings so they'll see more money coming back to them on payday, rather than getting a lump sum from a state tax refund, Ramirez said.

"A lot of people use their tax refunds as a forced savings account," he said. "They know that money's going to be there at year's end, even though financial planners tell you that's the worst thing to do. But people are now obviously frustrated and upset and want to change their withholdings so next year their refund will be very small or nonexistent."

Before this year, Hawai'i's philosophy was to get "refunds out as quick as possible to get people to go out and spend it and put that money back into the economy," Ramirez said.

Now, some of his clients are wondering whether they can delay meeting the state's April 20 filing deadline since they won't see a return for several months.

"No," he tells his clients. "Unfortunately, based on the laws, they (the state) have the ability to do this."

So that leaves taxpayers such as Shanna Toves of Mililani wondering how she'll get by without the $700 to $1,000 she usually gets from her state refund.

"I always rely on my refund for bills, the usual things," Toves said. "It's definitely going to put a burden on my finances."

Jane Kutuzova of Mō'ili'ili already received her federal refund and, until yesterday, wondered why her state refund had not arrived.

It will be only $200, but that's no small amount for Kutuzova, a graduate student at Argosy University in Downtown Honolulu.

So when that $200 from the state finally arrives sometime this summer, Kutuzova said, "every little bit helps."