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April 14, 2008


DiNapoli’s Office Stops Nearly $13 Million in
Questionable Tax Refunds

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The State Comptroller’s Office stopped nearly $13 million in questionable income tax refunds from being paid so far in 2008, New York State Comptroller Thomas P. DiNapoli said today. DiNapoli’s office is responsible for auditing all bills for the state prior to payment, including tax refunds.

“Doing your taxes isn’t easy and sometimes taxpayers make honest mistakes,” DiNapoli said. “But there are those who try to beat the system through outright fraud. The scams can be elaborate and hard to spot. Sometimes they involve a fake Social Security number or falsely claiming a child as a dependent. Whatever the scam, we’re working with the state Department of Taxation and Finance to find the fraud and make sure only legitimate tax refunds get paid.”

New York State Department of Taxation and Finance Commissioner Robert L. Megna said, “The Tax Department is committed to rooting out fraud and exposing those who deliberately file false tax returns. Honest taxpayers who voluntarily meet their obligations are the victims when tax cheats commit crimes of fraud and larceny. Our Department aggressively investigates criminal violations of our tax laws and we are pleased to be working with Comptroller DiNapoli and his staff to help bring tax cheats to justice.”

The majority of questionable refunds were filed by income tax preparers who promise unsuspecting taxpayers large refunds. Typically, these suspected fraudulent preparers claim credits for ineligible child care or credits allowed only for low-income households. Some fraudulent preparers keep a file of children’s social security numbers for use on fraudulent returns. Often the children listed on a tax return one year will show up on a different, unrelated tax return the following year. Questionable refunds may be forwarded to law enforcement agencies for review.

To date, $12,881,406 in questionable refunds have not been paid because:

Reason For Stopping Tax Refund Number of Refunds Dollar Value of Refunds
Tax Preparer Submitted Returns Claiming Ineligible Refundable Credits (e.g. fictitious day care centers, understating income or inflating number of dependents) 1,721 $3,906,620
Taxpayers Claiming Ineligible Refundable Credits (examples above) 522 $1,505,217
Taxpayer Failed to Claim Correct New York State Income 427 $6,830,767
Taxpayer Made Errors in Reporting Income, Wages or Withholding 192 $319,035
Taxpayer Failed to Claim Correct New York City Income 151 $269,017
Various Other Reasons 39 $50,750
Total Inappropriate Refunds Not Paid 3,052 $12,881,406

About the State Comptroller’s Office Role in Examining State Payments
During tax season, DiNapoli’s Office has audit staff on-site at the Department of Taxation and Finance to ensure that inappropriate or fraudulent personal income tax refunds are not paid. Using various fraud detection techniques, including computer filters designed to detect unusual filings or other red flags, millions of dollars in inappropriate refunds are not paid. The State Comptroller’s office processes nearly 82,000 state payments daily. In SFY 2007-08, it processed more than 20 million payments totaling $87.3 billion.


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