Over the years I've found that many taxpayers will NEVER challenge an IRS or state tax department “adjustment”. Even though the proposed adjustments are often wrong, taxpayers will just pay the added tax without question.
That’s part of the problem with a new program by NYS Taxation and Finance.
The Department has been sending letters to taxpayers, shortly after their returns are submitted, indicating there are issues with their return, and their refunds could be delayed as much as 5 more months.
“After reviewing your return, we're unable to verify the amounts you claimed as itemized deductions on your return. We've re-computed your return using the allowable standard deduction. You should receive an adjusted refund in approximately 60 days.”
If you don’t agree with their decision, you can submit documentation for each of your itemized deductions, and wait another 3 months for your refund.
"If you can't send us proof of your itemized deductions, or if you are satisfied with the re-computation using the standard deduction, you don't need to do anything else."
But, they threaten, "if the documentation you submit results in an adjustment to your tax return, a similar adjustment may be made to the income tax returns you filed in the two previous years."
What’s the problem? We already know that some taxpayers will simply accept the state’s unfounded disallowance of deductions. Some will see the implied threat to the two prior years as an added incentive to “shut up and pay up.” And those that do contest the disallowance will incur unnecessary time to locate the needed documents and make copies, and unnecessary professional fees in preparing their response.
