senate Bill S1985A

Clarifies the recordkeeping requirements for the earned income tax credit and the enhanced earned income tax credit

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Bill Status


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor
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  • 09 / Jan / 2013
    • REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS
  • 08 / Jan / 2014
    • REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS
  • 29 / Jan / 2014
    • AMEND AND RECOMMIT TO INVESTIGATIONS AND GOVERNMENT OPERATIONS
  • 29 / Jan / 2014
    • PRINT NUMBER 1985A

Summary

Clarifies the recordkeeping requirements for the earned income tax credit and the enhanced earned income tax credit.

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Bill Details

See Assembly Version of this Bill:
A2422A
Versions:
S1985
S1985A
Legislative Cycle:
2013-2014
Current Committee:
Senate Investigations And Government Operations
Law Section:
Tax Law
Laws Affected:
Amd §606, add §658-a, Tax L
Versions Introduced in 2011-2012 Legislative Cycle:
S7064, A9965

Sponsor Memo

BILL NUMBER:S1985A

TITLE OF BILL: An act to amend the tax law, in relation to clarifying
the recordkeeping requirements for the earned income tax credit and
the enhanced earned income tax credit

PURPOSE:

This bill clearly delineates the record keeping requirements for any
taxpayer paid principally in cash who is claiming the earned income
tax credit or enhanced earned income tax credit.

SUMMARY OF PROVISIONS:

Section 1. Adds a new paragraph 8 to subsection (d) of section 606 of
the tax law (TAX) to provide that any taxpayer who receives more than
fifty percent of his or her income in cash may follow the income
documentation standards under § 658-a when claiming the earned income
credit.

Section 2. Adds a new paragraph (9) to TAX § 606(d-1) to provide that
any taxpayer who receives more than fifty percent of his or her income
in cash may follow the income documentation standards under § 658-a
when claiming the enhanced earned income credit.

Section 3. Adds a new § 658-a to the tax law establishing uniform
standards for documenting cash earnings. Such documentation may
include permanent books, accounts or records kept in a manner
consistent with the recordkeeping practices of the industry in which
the taxpayer works, signed statements from the taxpayer's employer
stating hours worked and wages paid, financial institution statements
demonstrating regular cash deposits, receipts from various
work-related expenses, or a sworn affidavit from the taxpayer.

Section 4. Effective date.

EXISTING LAW:

Expands upon subsection (d) of section 606 of the Tax Law dealing with
the earned income credit. Adds new paragraph 8.

JUSTIFICATION:

There are examples of taxpayers who earn their wages predominantly in
cash and who are eligible for and claim the Earned Income Tax Credit.
The Department of Taxation and Finance denies many of the claims due
to lack of sufficient income documentation, but approves other claims
when the income documentation provided is equally scant. This bill
will clearly set uniform standards that the Department of Taxation and
Finance can rely on so that cash earners will know what income
documentation methods are acceptable so that they may receive the
earned income tax credit to which they are rightfully entitled.

LEGISLATIVE HISTORY:

2012 S.7064 - Referred to Investigations and Government Operations


FISCAL IMPLICATIONS:

None.

EFFECTIVE DATE:

This act shall take effect on the one hundred twentieth day after it
shall have become a law.

view bill text
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                 1985--A

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                               (PREFILED)

                             January 9, 2013
                               ___________

Introduced  by Sen. CARLUCCI -- read twice and ordered printed, and when
  printed to be committed to the Committee on Investigations and Govern-
  ment Operations -- recommitted to the Committee on Investigations  and
  Government  Operations  in  accordance  with  Senate Rule 6, sec. 8 --
  committee discharged, bill amended, ordered reprinted as  amended  and
  recommitted to said committee

AN ACT to amend the tax law, in relation to clarifying the recordkeeping
  requirements  for the earned income tax credit and the enhanced earned
  income tax credit

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1. Subsection (d) of section 606 of the tax law is amended by
adding a new paragraph 8 to read as follows:
  (8) INCOME DOCUMENTATION. ANY TAXPAYER WHO RECEIVES  MORE  THAN  FIFTY
PERCENT  OF  HIS  OR HER INCOME IN CASH WHO IS CLAIMING THE CREDIT UNDER
THIS SUBSECTION MAY FOLLOW THE INCOME DOCUMENTATION STANDARDS SET  FORTH
IN SECTION SIX HUNDRED FIFTY-EIGHT-A OF THIS ARTICLE WHEN APPLICABLE.
  S  2.  Subsection  (d-1)  of  section 606 of the tax law is amended by
adding a new paragraph 9 to read as follows:
  (9) ANY TAXPAYER WHO RECEIVES MORE THAN FIFTY PERCENT OF  HIS  OR  HER
INCOME  IN  CASH  WHO  IS  CLAIMING THE CREDIT UNDER THIS SUBSECTION MAY
PROVE HIS OR HER INCOME BY FOLLOWING THE INCOME DOCUMENTATION  STANDARDS
SET  FORTH  IN  SECTION  SIX  HUNDRED FIFTY-EIGHT-A OF THIS ARTICLE WHEN
APPLICABLE.
  S 3. The tax law is amended by adding a new section 658-a to  read  as
follows:
  S  658-A. INCOME DOCUMENTATION CONCERNING THE EARNED INCOME CREDIT. IN
CONJUNCTION WITH  THE  REQUIREMENTS  SET  FORTH  IN  THIS  CHAPTER,  THE
PROVISIONS  OF  THIS  SECTION  SHALL  APPLY TO ANY TAXPAYER CLAIMING THE

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD00956-02-4

S. 1985--A                          2

EARNED INCOME CREDIT AS SET FORTH  IN  SUBSECTION  (D)  OF  SECTION  SIX
HUNDRED SIX OF THIS ARTICLE.
  (A)  INCOME  DOCUMENTATION STANDARDS FOR CASH EARNERS. IF THE TAXPAYER
IS EMPLOYED IN ONE OR MORE OCCUPATIONS WHERE SUCH TAXPAYER RECEIVES MORE
THAN FIFTY PERCENT OF HIS OR HER INCOME IN CASH, SUCH TAXPAYER MAY PROVE
HIS OR HER INCOME BY PRODUCING ONE OF THE FOLLOWING VERIFICATIONS:
  (1) PERMANENT BOOKS, ACCOUNTS OR RECORDS KEPT IN A  MANNER  CONSISTENT
WITH  THE  RECORDKEEPING PRACTICES OF THE INDUSTRY IN WHICH THE TAXPAYER
WORKS. FOR THE PURPOSES OF THIS SECTION, "PERMANENT BOOKS,  ACCOUNTS  OR
RECORDS"  SHALL  MEAN  PAPER  OR  ELECTRONIC  DOCUMENTS THAT REFLECT THE
AMOUNT AND SOURCE OF ALL INCOME EARNED FROM PAID EMPLOYMENT.
  (A) EXAMPLES OF PERMANENT BOOKS, ACCOUNTS OR  RECORDS  SHALL  INCLUDE,
BUT  SHALL  NOT  BE LIMITED TO (I) BANK STATEMENTS FROM FINANCIAL INSTI-
TUTIONS, (II) ELECTRONIC LEDGERS OR SPREADSHEETS THAT DOCUMENT THE  DATE
OF  EACH  ENTRY,  OR  (III)  HANDWRITTEN  ACCOUNTS MAINTAINED IN A BOUND
LEDGER.
  (B) A DIFFERENT LEDGER SHALL BE MAINTAINED FOR EACH  TAX  YEAR'S  CASH
EARNINGS RECORDS, AND EACH RECORD SHALL BE MAINTAINED FOR AT LEAST THREE
YEARS AFTER THE TAX YEAR FOR WHICH IT WAS SUBMITTED.
  (C)  ENTRY  REQUIREMENTS  FOR  HANDWRITTEN  LEDGERS. (I) A HANDWRITTEN
LEDGER DOCUMENTING THE TAXPAYER'S INCOME SHALL  LIST,  IN  CHRONOLOGICAL
ORDER, AN ENTRY FOR EACH TRANSACTION FOR WHICH SUCH TAXPAYER EARNS MONEY
WITH INFORMATION THAT INCLUDES, BUT IS NOT LIMITED TO:
  (I) THE AMOUNT OF MONEY EARNED;
  (II) THE APPROXIMATE TIME AND DATE ON WHICH THE MONEY WAS EARNED; AND
  (III)  A  BRIEF DESCRIPTION OR LIST OF THE TASK OR TASKS PERFORMED FOR
THE MONEY EARNED.
  (II) SUCH RECORD MAY INCLUDE ENTRIES  FOR  WORK-RELATED  EXPENSES  AND
EACH SUCH ENTRY SHALL INCLUDE, BUT IS NOT LIMITED TO:
  (I) THE AMOUNT OF THE WORK-RELATED EXPENSE;
  (II)  THE  APPROXIMATE  TIME  AND  DATE  THE  WORK-RELATED EXPENSE WAS
INCURRED;
  (III) THE NATURE OF THE WORK-RELATED EXPENSE; AND
  (IV) THE DATE ON WHICH THE ENTRY WAS MADE.
  (III) AN ENTRY FOR ANY TRANSACTION SHALL BE MADE AS SOON  AS  POSSIBLE
AFTER THE TRANSACTION OCCURRED.
  (2)  ADDITIONAL  ACCEPTABLE  INCOME  VERIFICATION  DOCUMENTS.  IN  THE
ABSENCE OF PERMANENT BOOKS, ACCOUNTS OR RECORDS, A TAX FILER MAY  VERIFY
INCOME BY PRODUCING TWO OR MORE OF THE FOLLOWING:
  (A) A SIGNED LETTER FROM THE TAXPAYER'S EMPLOYER STATING WAGES PAID;
  (B)  STATEMENTS  FROM A FINANCIAL INSTITUTION THAT DEMONSTRATE REGULAR
DEPOSITS OF EARNINGS;
  (C) RECEIPTS FROM WORK SUPPLIES, INCLUDING BUT NOT LIMITED TO UNIFORMS
AND MATERIALS NEEDED TO COMPLETE A SPECIFIC JOB;
  (D) RECEIPTS FROM LICENSING OR CERTIFICATION FEES, MEMBERSHIP DUES, OR
OTHER PROFESSIONAL DUES;
  (E) RECEIPTS FROM WORK-RELATED EXPENSES, INCLUDING BUT NOT LIMITED  TO
TRANSPORTATION COSTS AND CHILD CARE;
  (F) A SWORN AFFIDAVIT, SIGNED BY THE TAXPAYER, STATING SUCH TAXPAYER'S
POSITION  OR  TITLE,  THE  NUMBER  OF  WEEKS WORKED, THE NUMBER OF HOURS
WORKED PER WEEK, THE WAGES EARNED, AND A BRIEF DESCRIPTION OF  THE  WORK
PERFORMED.  A  SEPARATE  NOTARIZED AFFIDAVIT SHALL BE COMPLETED FOR EACH
JOB;
  (G) AN INCOME AND EXPENSES WORKSHEET COMPLETED WITH  A  CERTIFIED  TAX
PROFESSIONAL.

S. 1985--A                          3

  (B)  ERRORS  OR  OMISSIONS.  OMISSIONS  OR FAILURES TO CORRECT ENTRIES
SHALL NOT BE SUFFICIENT IN AND OF  THEMSELVES  TO  RENDER  A  TAXPAYER'S
RECORDS  AS  INADEQUATE TO VALIDATE SUCH TAXPAYER'S INCOME FOR THE RELE-
VANT TAX YEAR.
  (C)  PRESUMPTION  OF  ACCURACY AND COMPLETENESS. (1) PROVIDED THAT THE
MINIMUM STANDARDS SET FORTH IN THIS SECTION  ARE  MET,  AND  UNLESS  THE
DEPARTMENT  HAS  AFFIRMATIVE EVIDENCE TO DIRECTLY CONTRADICT THE TAXPAY-
ER'S RETURN, THE DEPARTMENT SHALL PRESUME THE ACCURACY AND  COMPLETENESS
OF THE RECORD AND THE GOOD FAITH OF THE TAXPAYER.
  (2)  THE PARTICULAR FORMAT OF THE RECORD SHALL NOT BE USED AS EVIDENCE
OF INSUFFICIENT RECORDKEEPING OR BAD FAITH ON THE PART OF THE TAXPAYER.
  (3) A MID-YEAR CHANGE IN THE FORMAT OF RECORDKEEPING WITHIN  A  SINGLE
LEDGER  SHALL  NOT BE CONSIDERED EVIDENCE OF INCOMPLETE RECORDKEEPING OR
BAD FAITH IF SUCH CHANGE INDICATES AN ATTEMPT TO  IMPROVE  UPON  RECORD-
KEEPING.
  (D)  REPORT.  (1) ON OR BEFORE JUNE THIRTIETH NEXT SUCCEEDING THE DATE
ON WHICH THIS SECTION SHALL HAVE BECOME A LAW, AND ANNUALLY  THEREAFTER,
THE  COMMISSIONER  SHALL SUBMIT A WRITTEN REPORT REGARDING TAXPAYERS WHO
CLAIM THE EARNED INCOME CREDIT AS SET FORTH IN SUBSECTION (D) OF SECTION
SIX HUNDRED SIX OF THIS ARTICLE AND WHO ARE PAID PRINCIPALLY IN CASH.
  (2) THE REPORT MUST CONTAIN THE FOLLOWING INFORMATION ABOUT THE EARNED
INCOME CREDIT CLAIMED UNDER THIS ARTICLE DURING  THE  PREVIOUS  CALENDAR
YEAR:
  (A) THE NUMBER OF CASH EARNERS CLAIMING THE CREDIT;
  (B)  THE  NUMBER OF CASH EARNERS CLAIMING THE CREDIT WHO ARE SENT DESK
AUDIT INQUIRY LETTERS;
  (C) THE NUMBER OF RESPONSES TO THE  AUDIT  INQUIRY  LETTERS  THAT  THE
DEPARTMENT RECEIVES;
  (D) THE NUMBER OF CASH EARNERS CLAIMING THE CREDIT WHO ARE AUDITED AND
RECEIVE THE CREDIT AS A RESULT; AND
  (E) THE NUMBER OF CASH EARNERS CLAIMING THE CREDIT WHO ARE AUDITED AND
ARE DENIED THE CREDIT AS A RESULT.
  (3)  THE CREDIT REPORT MAY ALSO CONTAIN ANY OTHER INFORMATION THAT THE
COMMISSIONER DEEMS TO BE USEFUL IN EVALUATING THE USE OF THE  CREDIT  BY
CASH  EARNERS.  THE  INFORMATION  INCLUDED  IN THE CREDIT REPORT WILL BE
BASED ON THE INFORMATION FILED WITH THE DEPARTMENT DURING  THE  PREVIOUS
CALENDAR YEAR, TO THE EXTENT THAT IT IS PRACTICABLE TO USE THAT INFORMA-
TION.
  S 4. This act shall take effect on the one hundred twentieth day after
it  shall  have become a law. Effective immediately, the commissioner of
taxation and finance is  authorized  to  make  any  addition,  amendment
and/or repeal of any rule or regulation necessary for the implementation
of this act on its effective date on or before such date.

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