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

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S1985-2013 Actions

• Jan 9, 2013: REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS

S1985-2013 Memo

BILL NUMBER:S1985

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 docu-
ment 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 prop-
er 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 follow-
ing; 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 cash-
er 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 Commis-
sioner 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 rule-
making notices initially prepared on or after such date.

S1985-2013 Text

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

                                    1985

                         2013-2014 Regular Sessions

                              I N  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.