Clarifies the recordkeeping requirements for the earned income tax credit and the enhanced earned income tax credit.
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: The bill makes changes to the provisions of the Tax Law concerning various record keeping requirements to properly document qualification for the earned income tax credit or enhanced earned income tax credit:
o Subsection (d) of section 606 of the Tax law is amended by adding a new paragraph 8 concerning recordkeeping for cash earners and require compliance with requirements set forth in section 658-a.
o Section 2, subsection (d-l) of section 606 of the Tax Law is amended by adding a new paragraph 9 to clarify acceptable record keeping methods for any taxpayer who earns in cash and who is claiming the earned income tax credit or enhanced earned income tax credit.
o The bill amends Tax Law by adding a new section 658-a concerning proper income documentation. Section 658-a allows a taxpayer who has one or more jobs where taxpayer is paid principally in cash to provide proof of income by producing permanent books or records which are in paper or electronic form reflecting the amount and source of all income earned; a brief description of tasks or work performed, and a list of work related expenses when applicable. Separate books and records should be kept for each tax year's earnings. Records should be kept for three years.
o Section 658-a allows for other means to document cash income other than permanent books or records. Cash earners may use two of the following; a sworn affidavit signed by the filer, signed letter from employer stating wages paid, income and expenses worksheet completed with a certified tax professional, bank statements, receipts from a check casher reflecting regular receipt of wages, photocopies of checks, receipts from work related expenses.
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 standards that the Department of Tax and Finance may implement so that cash earners will know what income
documentation methods are acceptable so that they may receive the earned income tax credit.
LEGISLATIVE HISTORY: 2012 - S.7064 - Referred to Investigations and Government Operations
FISCAL IMPLICATIONS: None.
LOCAL FISCAL IMPLICATIONS: None.
EFFECTIVE DATE: This act shall take effect on the one hundred twentieth day after it shall have become 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. First day of October after having become a law - applicable to all rulemaking notices initially prepared on or after such date.
STATE OF NEW YORK ________________________________________________________________________ 1985 2013-2014 Regular Sessions IN SENATE (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 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) RECORDKEEPING. IN ADDITION TO ANY OTHER REQUIREMENT SET FORTH IN THIS CHAPTER, ANY TAXPAYER PAID PRINCIPALLY IN CASH WHO IS CLAIMING THE EARNED INCOME TAX CREDIT PURSUANT TO THIS SUBSECTION SHALL COMPLY WITH THE RECORDKEEPING REQUIREMENTS 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) IN ADDITION TO ANY OTHER REQUIREMENT SET FORTH IN THIS CHAPTER, ANY TAXPAYER WHO IS CLAIMING THE ENHANCED EARNED INCOME TAX CREDIT PURSUANT TO THIS SUBSECTION SHALL COMPLY WITH THE RECORDKEEPING REQUIRE- MENTS 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 TAX CREDIT. IN CONJUNCTION WITH THE REQUIREMENTS SET FORTH IN THIS CHAPTER, THE PROVISIONS OF THIS SECTION SHALL APPLY TO ANY TAXPAYER CLAIMING THE EARNED INCOME TAX CREDIT AS SET FORTH IN SUBSECTION (D) OF SECTION SIX HUNDRED SIX OF THIS ARTICLE:EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD00956-01-3 S. 1985 2
(A) INCOME DOCUMENTATION STANDARDS FOR CASH EARNERS. IF THE TAXPAYER IS EMPLOYED IN ONE OR MORE JOBS WHERE SUCH TAXPAYER IS PAID PRINCIPALLY IN CASH, SUCH TAXPAYER MAY PROVE HIS OR HER INCOME BY PRODUCING ONE OF THE FOLLOWING VERIFICATIONS: (1) "PERMANENT BOOKS OR RECORDS" ARE PAPER OR ELECTRONIC DOCUMENTS THAT REFLECT THE AMOUNT AND SOURCE OF ALL INCOME EARNED FROM PAID EMPLOYMENT. (2) EXAMPLES OF "PERMANENT BOOKS OR RECORDS" INCLUDE BUT ARE NOT LIMITED TO: (A) STATEMENTS FROM FINANCIAL INSTITUTIONS REFLECTING DEPOSITS OF MONEY EARNED; (B) ELECTRONIC LEDGERS OR SPREADSHEETS; OR (C) HANDWRITTEN ACCOUNTS MAINTAINED IN A BOUND LEDGER. (3) A DIFFERENT LEDGER SHOULD 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. (B) ENTRY REQUIREMENTS FOR HANDWRITTEN LEDGERS. (1) SUCH RECORD SHALL INCLUDE, IN CHRONOLOGICAL ORDER, AN ENTRY FOR EACH TRANSACTION FOR WHICH SUCH TAXPAYER EARNS MONEY WITH INFORMATION THAT INCLUDES, BUT IS NOT LIMITED TO: (A) THE AMOUNT OF MONEY EARNED; (B) THE APPROXIMATE TIME AND DATE ON WHICH THE MONEY WAS EARNED OR RECEIVED; (C) THE PORTION OF THE MONEY RECEIVED, IF ANY, THAT WENT TO THE TAXPAYER'S EMPLOYER; (D) A BRIEF DESCRIPTION OR LIST OF THE TASK OR TASKS PERFORMED FOR THE MONEY EARNED. (2) SUCH RECORD MAY INCLUDE ENTRIES FOR WORK-RELATED EXPENSES AND EACH SUCH ENTRY MAY INCLUDE, BUT NOT BE LIMITED TO THE: (A) AMOUNT OF THE WORK-RELATED EXPENSE; (B) APPROXIMATE TIME AND DATE THE WORK-RELATED EXPENSE WAS INCURRED; (C) NATURE OF THE WORK-RELATED EXPENSE; AND (D) DATE ON WHICH THE ENTRY WAS MADE. (3) AN ENTRY FOR ANY TRANSACTION SHALL BE MADE AS SOON AS POSSIBLE AFTER THE TRANSACTION OCCURRED; PROVIDED, HOWEVER, THAT A CORRECTION TO AN ENTRY SHALL NOT BE INVALID IF IT IS MADE MORE THAN THIRTY DAYS AFTER THE TRANSACTION FOR WHICH SUCH ENTRY WAS MADE. (C) ADDITIONAL ACCEPTABLE INCOME VERIFICATION DOCUMENTS. (1) IN THE ABSENCE OF PERMANENT BOOKS OR RECORDS, A TAX FILER MAY VERIFY INCOME BY PRODUCING TWO OR MORE OF THE FOLLOWING: (A) A SWORN AFFIDAVIT, SIGNED BY THE FILER, STATING: POSITION OR TITLE, NUMBER OF WEEKS WORKED, NUMBER OF HOURS WORKED PER WEEK, THE WAGES EARNED AND A BRIEF DESCRIPTION OF WORK PERFORMED. A SEPARATE NOTA- RIZED AFFIDAVIT SHOULD BE COMPLETED FOR EACH JOB; (B) RECEIPTS FROM WORK SUPPLIES, INCLUDING BUT NOT LIMITED TO: UNIFORMS AND MATERIALS NEEDED TO COMPLETE A SPECIFIC JOB; (C) RECEIPTS FROM LICENSING OR CERTIFICATION FEES, MEMBERSHIP DUES, OR OTHER PROFESSIONAL DUES; (D) RECEIPTS FROM WORK-RELATED EXPENSES, INCLUDING BUT NOT LIMITED TO, TRANSPORTATION COSTS AND CHILD CARE; (E) SIGNED LETTER FROM EMPLOYER STATING WAGES PAID; (F) INCOME AND EXPENSES WORKSHEET COMPLETED WITH A CERTIFIED TAX PROFESSIONAL; (G) RECEIPTS FROM A CHECK CASHER REFLECTING REGULAR RECEIPT OF WAGES; (H) PHOTOCOPIES OF CHECKS, OR PAY ENVELOPS, GIVEN TO THE TAXPAYER AS PAYMENT FOR GOODS OR SERVICES.S. 1985 3
(D) ERRORS OR OMISSIONS. A DE MINIMIS NUMBER OF OMISSIONS OR FAILURES TO CORRECT ENTRIES SHALL NOT BE SUFFICIENT IN AND OF ITSELF TO RENDER A TAXPAYER'S RECORDS INADEQUATE TO VALIDATE THAT TAXPAYER'S INCOME FOR THE RELEVANT TAX YEAR. (E) PRESUMPTION OF ACCURACY AND COMPLETENESS. (1) SO LONG AS THE MINI- MUM REQUIREMENTS 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) PROVIDED THE MINIMUM REQUIREMENTS SET FORTH IN THIS SECTION ARE MET, 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) PROVIDED THE MINIMUM REQUIREMENTS SET FORTH IN THIS SECTION ARE MET, 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. 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.