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Taxing delay

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Most New Yorkers file their state income tax forms electronically and the state promptly processes the return, sending taxpayers tax refunds due. However, 10 percent of taxpayers opt to file a paper return and many of them have discovered that the state contractor hired to process tax returns filed on paper is incapable of prompt action.

The only good news here is that taxpayers waiting for refunds began to earn 2 percent interest on June 1 — a return substantially more than any New York bank is paying on savings accounts.

The Albany Times Union reports that the state Tax Department is studiously avoiding answering mounting questions about the status of tax returns filed by mail.

What the Times Union reported was that Tax Department employees have been assigned to clean up the mess created by a new contractor hired to replace the Bank of America, which had performed the service for 18 years.

The state comptroller’s office reports that the not-for-profit New York State Industries for the Disabled partnered with Source HOV, a Dallas, Texas, for-profit corporation to win a non-competitive bid.

The state allows noncompetitive contract awards to “preferred source” businesses as long as the price is no more than 15 percent above typical rates paid for such services. The transition has not worked, costing the state money and frustrating taxpayers who have been unable to find an answer about whether their return has even been received, let alone where their refund might be.

The top priority at this point should be processing the returns, but when all the refunds are in the hands of taxpayers, the Tax Department needs to examine its preferred source contracting scheme, which allowed a not-for-profit to partner with a for-profit partner at a fee higher than what would have resulted from competitive bidding. The purpose of the preferred source practice has been subverted by incompetency.

The state has been encouraging taxpayers to file electronically and that system seems to be performing. However, there are certain tax situations that require paper returns, and some people simply do not want to buy the software required to file electronically or they mistrust computer systems.

Taxpayers without their refunds are frustrated. They could use the money, but many fear that if they complain they will be subjected to a retaliatory audit. It is a sad commentary on the relationship between government and the governed when taxpayers are afraid to ask innocent questions about their tax returns.

The state has not been forthcoming on the issue of processing paper tax returns. Taxpayers caught in this situation should be notified of the status of their return. And since many of those tax forms came from people who do not depend upon computers or even fear computers, the notice needs to be mailed to the taxpayer, not a note hidden embedded upon a state website.

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