Audit: Firm mishandled thousands of New York tax returns

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ALBANY, N.Y. (AP) — A New York state contractor hired to handle paper tax returns cost the state millions in overtime and made mistakes in nearly one quarter of the returns it processed last year, according to a state audit released Wednesday.

The review found that the contractor introduced errors into an estimated 22 percent of the more than 2 million paper returns it handled in 2013. In addition, the audit found the contractor was slow to process more than 1.8 million returns — or more than 90 percent of the total.

The state’s Department of Tax and Finance racked up $6 million in overtime to correct the problems and delays.

State Comptroller Thomas DiNapoli, whose office conducted the audit, said tax officials should have done more to oversee its contractor. He’s recommending that the state reduce its payments to the contractor, and notes that the tax department has already taken steps to prevent similar problems this year.

The contractor — New York State Industries for the Disabled — was hired to process paper tax returns for three years beginning last year. NYSID is an Albany-based nonprofit that aims to provide employment for disabled residents by taking contracts with state and local governments.

NYSID partnered with a Dallas-based company called SourceHOV to process the returns. A message left with SourceHOV was not returned Wednesday afternoon, but in a statement, NYSID spokesman Paul Quirini said his organization “worked closely with the state to address the issues that occurred last year and we are confident those issues have been resolved.”

The $16 million contract is contingent on the contractor meeting performance goals, including return processing accuracy and timeliness, and allows the state to pay less if the goals aren’t met.

In a formal response to the audit, tax department Deputy Commissioner Edward Chaszczewski said his agency has improved its daily oversight of the contractor to prevent similar problems from recurring.

The audit also recommends that the department review whether it needs to hire a third-party contractor to process paper tax returns in the future. provides commenting to allow for constructive discussion on the stories we cover. In order to comment here, you acknowledge you have read and agreed to our Terms of Service. Commenters who violate these terms, including use of vulgar language or racial slurs, will be banned. Please be respectful of the opinions of others. If you see an inappropriate comment, please flag it for our moderators to review. Note: Comments containing links are not allowed.

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