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New York Cracks Down on Tax Fraud

August 20, 2009

The Empire State is ramping up efforts to hunt down tax evaders, as well as the tax preparers who help them get away with it.

At a New York State Society of CPAs conference yesterday, Deputy Commissioner for Enforcement William Comiskey told attendees that the state has approved new laws and initiatives aimed at under-reporters, according to an account on the society’s Web site. The state also has a voluntary disclosure program in place, reminiscent of the one the IRS is now pushing to encourage Swiss bank account holders to come forward before the IRS finds out about them from the documents it’s now going to get from UBS and the Swiss government.

Meanwhile, on the tax preparer side, the Albany Times-Union also interviewed Comiskey recently and he revealed that his department has been doing undercover work investigating practitioners.

“This year, we've done a little project on tax preparers.... we've done it at 170 different tax preparers. Fifty-one of them have prepared bad returns that are just horribly fraudulent. I have some transcripts ... here's one: a tax preparer describes how he's gonna do a 'ho-hum, no muss, no fuss, simple [expletive] return that's gonna get through the system' and he'll never get audited and never get caught. He underreports income then for two years of about $80,000. ... We've arrested about 20 this year so far. And there's lots more in the wings."

Like the federal government, states like New York are enlisting tax enforcement employees in a quest for much-needed revenue. Tax collections are falling as property values plunge and businesses lay off workers and close down. With state budgets like New York’s out of balance, it’s no wonder that tax collectors are on the prowl for errant taxpayers and practitioners alike.

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