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

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.