New York State's Department of Taxation and Finance racked up more than $6 million in overtime costs last year when paper tax returns were filed far past their deadline, a recent audit has discovered. Ninety percent of the returns were filed late and 22 percent had "serious errors", such as incorrectly copied Social Security numbers.
The tax department was apparently struggling under the amount of returns filed on paper and, in an attempt to pick up the slack, hired a third party vendor to do the processing.
Auditors found that SourceHOV, the private firm hired to handle the returns, had a variety of problems processing the forms, particularly with the image quality of the documents once they were scanned into the state's system.
"The contractor hired by the state Department of Tax and Finance failed to meet many of its contract requirements and things quickly spun out of control," read a statement by Comptroller Thomas DiNapoli, whose office conducted the audit.
The error rate of the returns was more than 40 times the acceptable level required by performance standards in the contract, according to DiNapoli. Almost 20 percent of the state's 10.9 million income tax returns are filed on paper, but some of last year's returns weren't finished being processed until October. Eighty of the 100 sample forms tested were found to have taken over a month to process instead of the seven days specified in the contract.
New York State and SourceHOV are working together to improve the filing process for next tax season by implementing an oversight committee and employing new technology to simplify importing paper documents into the electronic system.
"[T]he Department has worked collaboratively with SourceHOV to test the new software and to improve the optical character recognition processes as well as the physical flow of opening and sorting the returns received," the audit stated.
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