NYS Tax Commissioner to NYSSCPA: You Spoke, We Listened

Chris Gaetano
Published Date:
Dec 9, 2020
Michael R. Schmidt

New York State Tax Commissioner Michael R. Schmidt, who spoke at the Foundation for Accounting Education's New York and Tri-State Taxation Conference on Wednesday, pointed out that a number of new initiatives that the Department of Taxation and Finance has worked on came directly from engagement with the NYSSCPA. 

One was the passage this past August of electronic signature legislation for tax preparers, a measure that the Society had lobbied for over several years. Society leadership met several times with Schmidt, and his support led to passage of the legislation, a few months after Gov. Andrew Cuomo temporarily enabled e-signatures as an emergency measure due to the pandemic. The legislation allows the use of e-signatures for e-file authorizations and allows clients to provide such authorizations to their tax preparers by electronic means.

"So this legislation is a direct result of the engagement with this group. I'm pleased we could work together to make it happen, and I think it's an example of some of what we can do it we have these open channels of communication," Schmidt said.

Similarly, Schmidt pointed to his department's communications, particularly the requests for additional information to verify proper withholding. Through many conversations with NYSSCPA members, he learned that the volume of these notices was very high and that they represented an unnecessary burden on both taxpayers and their CPAs. He said that these concerns led to "months of work," as the department scrutinized the program, leading ultimately to it deciding to change the selection criteria for who gets notices and when.

"There should be a decrease in the number of withholding letters sent out this year," he said. "We think we'll be sending out roughly 100,000 fewer letters this coming year. We'll still identify meaningful discrepancies, still combat attempts at refund fraud, but we will be more targeted in our efforts to do so. Again, an example of how your feedback can lead to significant changes at the department."

On a similar theme, he said that the department has reworked its whole correspondence process to be more user-friendly. The wording, he said, is now clearer, and includes what he hopes are simpler and easier-to-understand directions for how to fix one's tax return. The department has also reworked how these correspondences are processed, along similar lines. One example is a taxpayer who neglects to attach a credit form. Normally, he said, the department would adjust the return to eliminate the credit and then provide a formal notice. Starting in January, taxpayers will get a second chance to send the missing form before the calculations are finalized.

He also said that the department is going to avoid what he called "kitchen sink" audits, in which it would ask for far more information than needed, and so it has started scaling back these requests.

"[These are] real important reforms, which we think will improve the experience of the taxpayer., he said. "It may get simpler, quicker, less stressful, and result in better outcomes."

State Tax Departments Lean Into the Virtual

The conference session also featured the tax department heads of New Jersey, Connecticut and New York City. A common theme that emerged among all of them, when discussing their reactions and challenges to the pandemic, was a heavy increase in remote work and a de-emphasis on physical presence that all thought were likely to persist in the future, to at least some degree. Much of this came from learning this year that many matters they thought required physical presence actually could be resolved by other means.

John J. Ficara, the director of the New Jersey Division of Taxation, for example, noted that the state had seven walk-in service centers at the start of the pandemic. When the pandemic hit in the spring, the department closed all of them down, but when June came, he said, "we realized the need for a face- to-face solution." So, the department decided to open one of its service centers and have meetings by appointment only. When making these appointments, the department would contact people by phone and see if the issue could be resolved without a site visit. Staff members found that, in the vast majority of cases, it could.

"We soon realized the majority of taxpayer inquiries could be resolved without an in-person appointment; only 6 percent [needed one]," he said. "The remaining 94 percent were resolved through phone or electronic assistance."

John Biello, the acting commissioner of the Connecticut Department of Revenue Services reported similar results. As in New Jersey, Connecticut closed all of its walk-in centers and discovered that it had overestimated how much in-person meetings were needed to resolve issues. Touting a seamless work-from-home transition where only 11 processing center employees were not telecommuting, Biello said that taxpayer inquiries were easily handled by phone and through the internet.

"We went through the April 15 and the expanded July 15 deadline, we went through the Oct. 15 extension due date without one single request for an in-person meeting or assistance request from a taxpayer," he said.

Harry Leonard, deputy commissioner of the New York City Department of Finance’s Tax Audit & Enforcement Division, said that prior to the pandemic, there was no work-from-home policy in the department. Everyone, from the commissioner on down, was expected to show up at the office. Therefore, the department had not emphasized electronic communications. But being in the pandemic's epicenter added new urgency to build the department's capacities at great speed, to the point where nearly everything is now done virtually, with people coming into the office only when absolutely necessary, such as to retrieve a hard copy of a document that no one has an electronic copy of. Similarly, he said, the city's e-services portal has undergone significant improvements, and when the changes soon launch, he said, it will be more intuitive and user-friendly.

While Leonard said that the department will be more virtual than it was before the pandemic, he thought that there would always be a need for at least some physical presence in an office. While some form of telecommuting will remain, he said that it would not be in the city's economic interest to have everyone working from home, not just for his department but for New Yorkers in general. He noted that if the government and the businesses abandon the city center, this means less businesses patronized, which means less tax revenue.

"And since we're about keeping New York City strong, we don't believe working from home in the long run to the largest extent is in the best interest of New York City from an economic development point of view," he said.

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