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

BILL NUMBER:S7064

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-1) 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

New bill.

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 become a law - applicable to all rule-making notices initially prepared on or after such date.