New York has stopped paying income tax refunds until after March 31, meaning hundreds of thousands of taxpayers will have to wait an extra two weeks for their money.

Gov. David A. Paterson’s budget director, Robert Megna, said Tuesday that tax refunds were suspended last Friday after they hit a $1.25-billion cap. The cap, first instituted in the early 1990s, limits refund payments.

State income-tax refunds will be delayed by several weeks as the state struggles to manage its cash flow amid growing budget deficits, officials said Tuesday. The move will save the state about $500 million.

It means that taxpayers who filed for refunds in late February and early March will have to wait a few extra weeks to get paid, officials said. Usually it takes three to four weeks to process a state tax return; people who filed within that period will have to wait about six weeks.

“This is certainly a difficult action and this impacts New Yorkers waiting for their refunds, but the fact that we even have to consider options like this speaks to how grave our fiscal circumstances are,” said budget spokesman Matt Anderson.

Paterson said Tuesday that the current budget gap has grown to about $2.1 billion. The state faces a $9.2 billion deficit in the 2010-11 fiscal year, which starts April 1.

(Source: http://www.theithacajournal.com/)