Longer timeline set for Indiana tax refunds from big surplus

April 13, 2022 GMT
Indiana Gov. Eric Holcomb speaks with reporters at the Indiana Statehouse in Indianapolis Feb. 23, 2022. Gov. Holcomb is facing criticism from many fellow Republicans and calls for an override of his veto on legislation banning transgender females from competing in girls school sports, a decision that put him at odds with a conservative cause that has led to similar state laws across the country. The bill passed by wide margins in the GOP-dominated Indiana Legislature _ and the House speaker announced plans Tuesday, March 22, 2022 for a May 24 meeting during which it could override the governor's veto with simple majorities in both the House and Senate. (AP Photo/Tom Davies)
Indiana Gov. Eric Holcomb speaks with reporters at the Indiana Statehouse in Indianapolis Feb. 23, 2022. Gov. Holcomb is facing criticism from many fellow Republicans and calls for an override of his veto on legislation banning transgender females from competing in girls school sports, a decision that put him at odds with a conservative cause that has led to similar state laws across the country. The bill passed by wide margins in the GOP-dominated Indiana Legislature _ and the House speaker announced plans Tuesday, March 22, 2022 for a May 24 meeting during which it could override the governor's veto with simple majorities in both the House and Senate. (AP Photo/Tom Davies)
Indiana Gov. Eric Holcomb speaks with reporters at the Indiana Statehouse in Indianapolis Feb. 23, 2022. Gov. Holcomb is facing criticism from many fellow Republicans and calls for an override of his veto on legislation banning transgender females from competing in girls school sports, a decision that put him at odds with a conservative cause that has led to similar state laws across the country. The bill passed by wide margins in the GOP-dominated Indiana Legislature _ and the House speaker announced plans Tuesday, March 22, 2022 for a May 24 meeting during which it could override the governor's veto with simple majorities in both the House and Senate. (AP Photo/Tom Davies)
Indiana Gov. Eric Holcomb speaks with reporters at the Indiana Statehouse in Indianapolis Feb. 23, 2022. Gov. Holcomb is facing criticism from many fellow Republicans and calls for an override of his veto on legislation banning transgender females from competing in girls school sports, a decision that put him at odds with a conservative cause that has led to similar state laws across the country. The bill passed by wide margins in the GOP-dominated Indiana Legislature _ and the House speaker announced plans Tuesday, March 22, 2022 for a May 24 meeting during which it could override the governor's veto with simple majorities in both the House and Senate. (AP Photo/Tom Davies)
Indiana Gov. Eric Holcomb speaks with reporters at the Indiana Statehouse in Indianapolis Feb. 23, 2022. Gov. Holcomb is facing criticism from many fellow Republicans and calls for an override of his veto on legislation banning transgender females from competing in girls school sports, a decision that put him at odds with a conservative cause that has led to similar state laws across the country. The bill passed by wide margins in the GOP-dominated Indiana Legislature _ and the House speaker announced plans Tuesday, March 22, 2022 for a May 24 meeting during which it could override the governor's veto with simple majorities in both the House and Senate. (AP Photo/Tom Davies)

INDIANAPOLIS (AP) — State officials will start sending out $125 payments to Indiana taxpayers next month under the state’s automatic taxpayer refund law, although the timeline announced Wednesday for those payments is several months longer than previously outlined.

Those payments are being made because of a big jump in state tax collections helped by federal COVID-19 relief funding. That revenue jump increased the state government’s cash reserves to a record $3.9 billion as of last summer, triggering the taxpayer refund law for the first time since 2012.

The refund payments totaling about $545 million will go to an estimated 4.3 million people, according to the governor’s office.

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Republican Gov. Eric Holcomb said in a statement that the refund would amount to a 12% cut in the average Indiana resident’s annual income tax liability.

“I’m beyond thrilled that this spring and summer we are returning money back into the hands of Hoosier taxpayers, where it belongs,” Holcomb said.

Those payments will start by direct deposit in May to those who have filed their 2021 income tax returns by April 18 and provided bank account information to the state Department of Revenue, the governor’s office said.

Direct deposit payments are expected to continue through July, while refund checks will be mailed to others beginning in late July with a goal of sending out all checks by Sept. 1.

That processing timeline is four months longer than the May 1 completion target that the governor’s office stated when announcing the refund amount in December.

State officials on Wednesday cited “supply chain issues” in the paper industry for delays in the mailing of checks.

“There are multiple steps required to handle the high-volume of ATRs, so we encourage Hoosiers to be patient throughout this process, as it will most likely extend to this fall,” a Department of Revenue statement said.

Holcomb in March signed a bill approved by the Legislature modifying the refund law so that about 450,000 people who don’t earn enough to owe any state income taxes are also eligible for the payments. Officials said those residents pay the sales tax and other taxes that are collected by state government.

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Even with the refund payments, continued strong tax collections are projected to push state government’s overall budget surplus to more than $5 billion by the end of June.

Republican legislators pushed through a plan in March that will gradually cut Indiana’s individual income tax from the current the rate of 3.23% to 2.9% in small steps until its planned full implementation in 2029. That will amount to $40 savings for individuals or families with $50,000 in taxable income for 2023, growing to a total annual reduction of $165 at that income level in seven years.

Republicans, however, ignored calls from Democrats for a suspension until July of the state’s 32 cents-a-gallon gasoline tax and the 7% sales tax on fuel. Democrats argued that would give immediate savings of potentially hundreds of dollars to residents amid a national surge in prices past $4 a gallon since the Russian invasion of Ukraine.