• New York Gets Tough(er): Tax Enforcement Actions, Fraud Detection and License Suspension, Oh My!
  • April 22, 2014
  • Law Firm: McDonald Hopkins LLC - Cleveland Office
  • Through a multifaceted approach, New York Gov. Cuomo and the New York Department of Taxation (Department) have increased tax collection efforts, penalties and criminal prosecution all in the name of collecting what is owed. New York is not alone in ramping up its efforts, as the trend in most states has been to increase tax collection efforts.

    Enforcement actions, audit and collections

    According to an announcement by Gov. Cuomo this week, the Department collected $3.9 billion in the past year through its wide array of tax enforcement programs. The $3.9 billion in evaded taxes collected is an increase of approximately $200 million over the amount collected last year. According to the announcement, 96 percent of the $87 billion in state and local taxes collected by the Department was voluntarily remitted. The enforcement programs were responsible for collecting the remaining four percent.

    The $3.9 billion collected breaks down in large part as follows:

    • $1.75 billion from criminal investigations and audits. The Department’s Criminal Investigations Division often works closely with federal and local law enforcement in these actions.

    • $1.65 billion from collection activities. These activities include working with taxpayers to resolve tax debt through settlement or payment in full, entering into payment arrangements, and garnishing wages and/or seizing financial assets.

    • $413 million in additional savings due to stopping payment on approximately 255,000 fraudulently filed or erroneously calculated refunds.

    • $100 million due to a new requirement that taxpayers confirm their eligibility for the Basic Star exemption (relating to school district taxes).

    • $56.4 million in collections resulting from the state’s new driver’s license suspension law.

    Tax fraud crackdown

    In a separate release, the Department touted the results of its efforts to reduce fraudulent or inaccurate claims for tax refunds. In 2013 alone, the Department claims to have stopped 255,000 fraudulent and erroneous tax refunds, totaling more than $413 million. In 2014, the Department has already identified $287 million in questionable refunds.

    The Department has accomplished this heighted level of fraud detection by utilizing a combination of technology and highly trained staff to review every return. The Department claims that of the roughly 10 million returns it receives each year, hundreds of thousands claim questionable refunds. The Department’s program was recognized with the Outstanding Technology Award from the Federation of Tax Administrators and has the potential to become a model for other states.

    Driver’s license suspension for delinquent taxes

    Last month, Gov. Cuomo announced that nearly 9,000 New Yorkers had their driver’s licenses suspended as a result of legislation signed into law last year, which allowed the Department to work with the New York State Department of Motor Vehicles to suspend the driver’s license of taxpayers who have delinquent tax liabilities to New York State in an amount equal to, or greater than, $10,000. As a result of the law, many delinquent taxpayers came forward to settle their tax debts.

    In August 2013, more than 17,700 drivers were contacted by the Department, which also resulted in 6,500 tax debtors making payments or paying in full their tax debt. The Department told drivers with more than $10,000 in back taxes to settle their debt or face losing their driving privileges.