New York State Works through Tax Refund Backlog

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The New York State Department of Taxation and Finance outsourced the responsibility of refunding money to a new contractor this year and many taxpayers who filed paper-based returns still have not received their refunds.

After using Bank of America to process the paper refunds for 18 years, the state signed a $16 million contract with New York State Industries for the Disabled, a not-for-profit group that helps provide employment for thousands of disabled employees in work for state and local governments. However, there have been delays with processing some of the refunds by a subcontractor hired by NYSID known as SourceHOV, a Dallas-based company.

According to Geoff Gloak, a spokesman for the New York State Department of Taxation and Finance, 96 percent of the tax refunds have been sent out and the remaining refunds are being processed daily. He predicted they should all be “wrapped up” by early August.

“This is after 18 years with the prior contractor, Bank of America,” Gloak added. “They decided they were getting out of the business. There has been a transition period. We worked with the new contractor, and the new contractor implements new systems and processes.”

The New York State Department of Taxation and Finance said last week that so far, 5.95 million tax refunds have been issued this year representing $5.3 billion—a dollar-for-dollar increase of 3 percent over last year at this time.

By law, interest is paid on refunds that are issued after May 30 for timely filed returns. Interest is paid only on that part of the refund resulting from over-withholding. To prioritize delivery of the delayed paper refunds, the tax department is assisting the contractor in both speeding up the processing and providing quality assurance. Recovery of the department’s costs associated with this effort—including staff overtime and interest payments—is provided for in the contract, and will not come at additional taxpayer expense, the tax department noted.

“In New York State, you’re required to pay interest 45 days after the filing due date of April 15, so beginning May 31 we’re paying interest on refunds,” said Gloak. “The interest goes back to April 15, so interest payments over time are provided for in the contract and won’t come at taxpayer expense.”

This year, nearly 90 percent of New York State taxpayers filed their returns electronically, up from 87 percent last year and only 58 percent just five years ago. Since 2008, New Yorkers have saved more than $250 million in processing costs as a result of e-filing, according to the tax department.

Fred Slater, CPA, a member of the tax and accounting firm MS1040 LLC in New York City, expressed anger at the tax refund delays. “I call it the head in the sand approach,” he said. “I have all kinds of questions about how much information they were given to process it. In other words, you’re giving your private information to a third party. What were they given? The state is doing everything in its power to push people to e-file, and they repeatedly contradict themselves on this, and force things. Not all of the returns are e-file-able to start with, by their own system restrictions, and then they go through this process of pushing you to e-file, but their system is not up to snuff.”

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