Governor Cuomo Proposes Crackdown on 'Refund Mills'

By:
Chris Gaetano
Published Date:
Feb 3, 2020

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New York Gov. Andrew Cuomo has proposed cracking down on "refund mills"— through which unscrupulous tax preparers file fraudulent returns to receive fraudulent refunds—by creating two new categories of crimes that specifically target tax professionals who enable or perpetuate fraud. The new crimes, part of the governor's proposed fiscal year 2021 budget, are:  

* Criminal tax preparation in the 1st degree, a Class C felony, for those accused of filing 50 or more returns knowing each return contains materially false information or omits material information with intent to evade or reduce a tax liability or to inflate a refund.    

  • * Criminal tax preparation in the 2nd degree, a Class D felony, for those accused of filing 10 or more returns knowing each return contains materially false information or omits material information with intent to evade or reduce a tax liability or to inflate a refund.  


"The brunt of tax fraud is placed on hardworking, law abiding New Yorkers who follow the rules and pay their fair share," said Cuomo. "We have zero tolerance for those who seek to break the law and rob New Yorkers in the process and with these reforms we will be able to better weed out bad actors and hold unscrupulous tax preparers accountable once and for all."  

The budget also updates various fraud statutes in the state's tax law, removing language that has caused judicial confusion and clarifying that tax fraud statutes apply when an individual commits any tax fraud act that deprives or defrauds the state of tax liabilities. The Tax Department routinely investigates tax schemes whereby fraudulent actors file false returns with claims for unlawful tax refunds, or fail to file returns altogether. However, the provisions of the tax law have at times been legally interpreted to require that a person actually "pay" the state some amount of money before that person could be found guilty of criminal tax fraud, allowing refund fraudsters to evade prosecution under these laws. The budget clarifies that all tax fraud acts may be prosecuted under these statutes.

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