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April 13, 2009


DiNapoli: $38 Million in Questionable Tax Refunds Stopped

The State Comptroller’s Office stopped over $38 million in questionable tax refunds from being paid so far in 2009, 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 personal income and corporate tax refunds.

“It’s no shock that people make mistakes or even cheat on their taxes,” DiNapoli said. “What is shocking is how the scams range from the elaborate to the blatantly obvious. Deductions may be overstated or just plain phony. Some people falsely claim they have children when they don’t, while others use fake social security numbers or addresses. Whatever the scam, we’re working in cooperation with Commissioner Megna and his staff to sort through the honest mistakes and find the fraud to make sure only legitimate tax refunds get paid.”

New York State Department of Taxation and Finance Commissioner Robert L. Megna said, “Every honest taxpayer suffers when tax cheats and criminals try to defraud the system. The Tax Department, working with auditors from the State Comptroller’s office, is committed to exposing those who steal state funds, money used to support health care, education and transportation programs. The Tax Department will aggressively pursue those who violate our tax laws and we are grateful for the support of Comptroller DiNapoli and his staff.”

When auditors examine corporate tax refunds, they verify that corporations provide adequate documentation when the companies report large operating losses. During March, auditors stopped three improper corporation tax refunds totaling over $26.3 million from being paid because of insufficient evidence of losses.

Auditors also identified a total of $11.8 million in questionable personal income tax refunds. The majority of questionable refunds were filed by taxpayers who claim credits for ineligible child care or credits allowed only for low-income households. In many instances, the filers’ income was understated, the number of dependents was inflated or the daycare providers had invalid employee identification numbers.

Questionable personal income tax refunds stopped include:

Reason for Stopping Tax Refund Number of Refunds Dollar Value of Refund
Taxpayers claiming ineligible refundable credits (e.g. Fake or inflated number of dependents, fictitious day Care centers, or understating income
Tax Preparer submitted returns claiming ineligible refundable credits
Taxpayer failed to claim correct New York State Income
Taxpayer had questionable itemized deductions
Taxpayer failed to claim correct New York City Income
Taxpayers had questionable social security numbers
Various other reasons
Total questionable refunds not paid

About the State Comptroller’s Office Role in Examining State Payments
The State Comptroller’s office processes about 130,000 state payments daily. In State Fiscal Year 2008-09, it processed more than 34 million payments totaling approximately $103 billion. During tax season, the office reviews tax refunds 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, DiNapoli’s office has ensured that millions of dollars in inappropriate refunds are not paid.



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