State asks more filers to prove they deserve credits they claim

ALBANY — In an effort to catch more tax cheats, the state is doubling the number of reviews it is doing on people seeking tax credits on their 2007 returns.

More than 1 million New Yorkers file annually for the credits, such as the Empire State Child Credit, which provides up to $330 per child to those who qualify. Many receive refunds as a result.

Tom Bergin, a spokesman for the state Department of Taxation and Finance, said 147,000 tax-credit filers were targeted this year, compared with 70,000 last year, in an effort to cut down on abuses.

So far, the efforts have saved the state $112 million in potentially fraudulent or undeserved credits and refunds, Bergin said.

The state is hoping to save as much as $170 million by the end of the process. New York processed 9.6 million personal tax returns for 2006 during last year’s tax season and about $2 billion in tax credits were awarded.

“We’re not targeting the average tax filer who is entitled to one of these tax credits,” Bergin said. “We have ways of tracking patterns of potential abusers. It’s not aimed at someone who is entitled to, or thinks they are entitled to it.”

In fact, the tax department urged taxpayers in a press release in March to take advantage of the state’s “host of family-friendly credits that lower tax bills and increase refunds.”

The department’s audit bureau has been notifying filers being targeted with letters asking for additional documentation for specific tax credits they are claiming.

In that sense, Bergin said, it’s not a full-blown audit but rather a “review” of documentation.

For instance, people claiming the Empire State Child Credit who are sent the letter must provide the department with a copy of the child’s Social Security card and birth certificate, and verification of his address on school or physician letterhead.

The letter says refund filers must reply to the taxation department with their documentation within 30 days, or their cases will be closed and their refunds will be denied. The review process can take up to 90 days, the letter says.

Bergin said unscrupulous tax preparers and individuals have been caught stealing personal information from clients to claim tax credits and refunds for their own profit.

“It can be very sophisticated,” he said. “Some of it’s organized.”

As a result, more of the department’s resources have been shifted toward detecting fraud and illegal schemes, Bergin said, although he did not have exact budget figures.

Assemblyman Herman Farrell Jr., D-N.Y., chairman of the Assembly’s Ways and Means Committee, said the audits are designed to protect those who deserve the credits and refunds.

“We’ve increased the ability to do audits to make sure we catch the people that are doing what they aren’t supposed to be doing,” he said.

Officials from the New York chapter of the National Association of Tax Professionals could not be reached for comment on the increase in audits.

But in her April newsletter, association president Kathryn Keane wrote members that she thought the state was “taking longer than normal to issue refunds to taxpayers” this year.