Purpose
The objective of our examination was to determine whether personal income tax refunds approved by the Department of Taxation and Finance (Department) for payment were appropriate and processed in accordance with applicable New York State tax laws and regulations. We examined refunds processed during the calendar year January 1, 2015 through December 31, 2015.
Background
The Department processes all New York State personal income tax returns. All returns that result in refunds are subject to audit by the State Comptroller prior to payment. We selected Department-approved refunds for examination using data analytics to identify high-risk transactions. During the period of our examination, the Department processed almost 7.5 million refunds totaling over $8.6 billion. From this population, we examined 31,978 refunds totaling almost $516.5 million for examination.
Key Findings
Of those transactions selected, we identified and returned to the Department 11,469 questionable refunds totaling about $53.3 million, as summarized in the following table:
|
Reason for Stopping Refunds |
Number of Refunds |
Dollar Value of Refunds |
|
Taxpayer claimed refundable credits based on incorrect information, such as fake or inflated number of dependents or understated income |
7,465 |
$24,766,106 |
|
Tax preparer submitted returns with refundable credits based on incorrect information |
1,314 |
4,102,937 |
|
Taxpayer had a questionable social security number |
972 |
2,470,546 |
|
Taxpayer failed to claim correct income |
727 |
12,721,480 |
|
Taxpayer had questionable itemized deductions |
155 |
857,796 |
|
Taxpayer claimed incorrect wages and withholding |
296 |
577,827 |
|
Other |
540 |
7,810,786 |
| Total Refunds Stopped |
11,469 |
$53,307,478 |
Key Recommendations
- Continue to pursue obtaining external data to prevent unwarranted credits.
- Continue working with our Office to identify and implement other opportunities to help detect and prevent erroneous refunds.
Holly Reilly
Division of Contracts and Expenditures
Holly Reilly, Director of State Expenditures
Phone: (518) 474-4868; Email: [email protected]
Address: Office of the State Comptroller; Division of Contracts and Expenditures; 110 State Street, 10th Floor; Albany, NY 12236