NY asks 182,000 filers to justify tax refunds

The state tax department sent about 182,000 letters to personal income tax filers--almost 2 percent of all residential filers--informing them that their tax returns are under review. The letters do not represent full-blown audits, though recipients are being told they must provide documentation backing up their refund claims before they receive their money.

The state is targeting filers who itemized deductions and claimed a refund under state tax credits, such as the earned income tax credit, a withholding credit or a real property tax credit, said agency spokesman Tom Bergin.

"We're finding an increase in suspicious and fraudulent refund claims in these particular credits," Bergin said. "In fact, we have some active investigations that are going to result in criminal charges."

State tax officials routinely send out such letters, though the number this year more than doubles the roughly 75,000 sent out last year and is far more than the 105,000 sent out in 2006. Bergin said the department is beefing up its audit and review operations and expects to recoup $234 million in refunds that are either inflated or illegal.

The letters annually bring in extra tax revenue for the cash-strapped state, amounting to $101 million last year.

One type of fraud agency computers are trying to uncover is criminal operations that send in returns under stolen identities, Bergin said. He added that some tax preparers regularly inflate refund claims, sometimes without their clients' knowledge.

Bergin said the Paterson administration is not going after average filers who deserve refunds.

"The people who can provide the information will not have a problem," he said.

Recipients of the letter are given 45 days to provide receipts, canceled checks or other documentation to back up refund claims. The agency's letter says that taxpayers who are not able to support their itemized deduction have another chance to take the standard deduction, "and we will make the appropriate adjustment."