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Tax Credit Fraud Investigation Saves The State Millions

Albany, NY (WIBX) – More than 3,600 residential property in New York have been duped into taking advantage of a tax credit that cost them money.


The New York State Department of Taxation and Finance says its investigation found that tax preparers filed claims for the Special Additional Mortgage Recording Tax Credit for them, but their customers weren’t entitled to it.

Tax and Finance Acting Commissioner Jamie Woodward says those claims were denied but the prepares reportedly charged between 25-40 percent of the credit.

Disallowing the claims saved the state $28.5 million, Woodward said. 

Form IT-256, “Claim For Special Additional Recording Tax Credit, is generally for real estate partners in a real estate investment, according to officials with the department.  Very few taxpayers are legitimately entitled to this credit, which generally involves large commercial properties, the department says.

“Claims of fraudulent credits are growing significantly,” Acting Commissioner Woodward said. “This case and others we have investigated highlights the need for taxpayers to perform their due diligence when choosing a preparer and to scrutinize their returns for accuracy.”

Woodward advises taxpayers that caution should be exercised when choosing a preparer and to that they should be especially wary of refund scams or fraud when using a preparer for their tax returns. The taxpayer is the responsible party when the Department disallows fraudulently claimed credits or deductions, not only for the actual tax obligation, but may face additional interest, penalties and possible criminal sanctions associated with fraudulent activity.

The Tax Department advises those seeking a preparer to:

• obtain references from the preparer’s clients;

• ask about service fees in advance and avoid preparers who guarantee a refund or base their fees on a percentage of the refund or credit;

• make sure they can contact the preparer after the return is filed; and

• research the preparer’s credentials through the Better Business Bureau, State Bar Association, or licensing authority for CPAs.

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