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, 2014 through December 31, 2014.

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 filters to identify high-risk transactions. During the period of our examination, the Department processed almost 7.4 million refunds totaling over $8.5 billion. Of this, we selected 37,900 refunds totaling almost $480 million for examination.

Key Findings

Of those transactions selected, we identified and returned to the Department 13,380 questionable refunds totaling about $55.6 million. This includes 2,620 questionable refunds valued at about $8.3 million based on data we obtained from select New York State and New York City agencies to identify taxpayers claiming unwarranted credits.

Key Recommendations

• Continue to pursue obtaining external data to prevent unwarranted credits.
• Continue to identify and implement other opportunities to help identify and prevent erroneous refunds.