Purpose

The objective of our examination was to identify potentially inappropriate Child and Dependent Care credits (credits) processed by the Department of Taxation and Finance (Department) for tax year 2015 because the expenses claimed were not paid by the taxpayer, but were paid, in whole or in part, through subsidies from the New York State Office of Children and Family Services (OCFS) or the New York City Administration for Children’s Services (ACS). To accomplish our objective, we matched a file of tax year 2015 personal income tax returns processed by the Department to the subsidized day care files provided by OCFS and ACS.

Key Findings

During the period of our examination, the Department processed 444,127 returns containing credits totaling $177.1 million. We found the Department processed 29,102 personal income tax returns for tax year 2015 that contained potentially inappropriate credits valued at $18.3 million.

While OSC is able to access the OCFS and ACS data for our audit purposes, we are precluded from sharing specific information about the contents of these files with the Department, including the existence and dollar amount of the subsidy. The findings from this examination demonstrate the benefits of pursuing legislation to allow the Department access to the OCFS and ACS subsidy data for auditing personal income tax returns.

Key Recommendations

• Continue to pursue legislation to allow the Department to obtain child care subsidy data directly from OCFS and ACS.
  • Use the data to identify taxpayers who claim inappropriate credits.