The state’s stepped-up program of screening Hawaii income tax returns to prevent fraud is delaying processing of more than $100 million in taxpayer refunds until after the end of the fiscal year on June 30, said state Tax Director Maria Zielinski.

In mid-March Zielinski said the state Tax Department had hoped to clear up the backlog caused by the additional screening before the end of June, but that is not going to happen.

The department has estimated that in a normal year it would be issuing $495 million in income tax refunds by June 30, but it is running considerably behind that pace this year, according to Tax Department data.

With the additional anti-fraud screening in place, tax officials were able to issue only an estimated $221 million in refunds by the end of April, and they expect to issue an additional $170 million in May and June, Zielinski said.

In a presentation to the state Council on Revenues this week, Zielinski said the Tax Department is working hard to push the refunds out "because we realize people are concerned about it, and we are too, of course." The council comprises a panel of economists and other specialists tasked with projecting state tax collections each year.

The Tax Department originally believed it would be able to process returns in six to eight weeks even with the new anti-fraud screening, but is now warning taxpayers it may take 16 weeks to process returns, she said.

Zielinski said the delays this year are "not acceptable."

"We will make certain that we catch up better than we have this year, that we will be better prepared for what is going to come down the pike," she said.

Tax officials announced earlier this year that the state now has 19 special "screens" it uses to filter individual filings to search out and flag returns that show signs of possible fraud.

This is the first year the department has been this aggressive in passing returns through a filtering process, and Zielinski admitted the department has applied the screening too stringently.

"Our screening was actually so good it was too good, it was not reasonable, so we had to go in and readjust it," Zielinski said. "We erred on the side of being too cautious … and it’s a fine line, and that’s what we’re learning right now."

She said the department will need to make further adjustments in years ahead, and "we realize that. It’s not a perfect solution right now, but we are working on that."

One problem the Tax Department faces is it does not have a stand-alone anti-fraud unit, and therefore the department is pulling workers for the expanded anti-fraud crackdown from various specialties within the department, such as office and field auditing, she said.

"This is something that we’re going to have to look at in the future, because the scammers are just getting smarter," Zielinski said. "They are getting more clever, they have a whole year to think about what they can do to get us from the flank when we’re thinking they’re coming straight at us."

"We’ll deal with that," she said, adding that the department will be holding planning meetings shortly to map out strategy for the years ahead.

DeputyDirector Joseph Kim said the department also is planning to award a contract to develop a more modernized tax system, and hopes to have the first components of that new system operating by next tax season.

Zielinski said she has no firm estimate of how many fraudulent returns have been detected or the dollar value of those returns, in part because the staff working to detect the bogus returns are scattered throughout the tax department.

"Have we collectively put it together? No. I have some idea of some numbers, but I don’t feel comfortable enough to put that out there," she told the council. "We realize that there’s always going to be something that’s going to pass through that we don’t catch, I think we have to be realistic about that, but we really made that net very, very fine this year, and that’s part of the reason why we’ve had such a delay."

Zielinski added she personally believes the value of fraudulent filings that escape detection is less than one-tenth of 1 percent of total tax collections.

After hearing Zielinski’s presentation, the Council on Revenues adjusted its tax collection projections for the current fiscal year to account for an extra $100 million in revenue because of the delay in refunds.

However, that new projection will not make any additional funding available to the state government because the $100 million will have to be used next fiscal year to pay out the delayed tax refunds.