Monday, August 17, 2009

30% of preparers in NY "secret shopper" visits "horribly fraudulent"

Today's Albany Times Union has a profile on William Comiskey, the Deputy Commissioner for Enforcement in the New York State Tax Department.

Mr. Comiskey comes across an energetic ironman--in his spare time, he has been training in the steep foothills near his home in Rensselaer County for a 500-mile bicycle race across the state. He also runs, swims, and plays soccer.

According to the article, he's got wisdom and experience as well as energy: He plays soccer on an "over-40" team but said he's "contemplating an over-50 team. Playing in a 40 year-old body is very different from playing as a 57 year-old."

He's also had a lot of experience in law enforcement:

He was appointed Deputy Commissioner of Tax Enforcement in March 2007 during the Spitzer administration, but has spent most of his career working for government in various enforcement capacities. Immediately after graduating from Fordham University School of Law, Comiskey clerked for New York Court of Appeals Judge Hugh R. Jones. He worked as an assistant district attorney in Manhattan and as Chief Assistant District Attorney in Rensselaer County, spent 10 years with the state's Organized Crime Task Force, and served as chief prosecutor for New York's physician disciplinary board at the Department of Health. He prosecuted Medicaid fraud and served as bureau chief in criminal prosecutions in the Attorney General's office under Eliot Spitzer before moving to Tax and Finance.

Mr. Comiskey sounds like a very determined guy, someone that honest taxpayers and tax preparers are happy to have on their side. Here's how he described his department's aggressive program of using undercover secret shoppers to ferret out dishonest preparers:

"Part of enforcement now is a lot of undercover work and we have a lot of interesting toys for capturing voices when people aren't quite aware they're being recorded. We have button-hole cameras and it has been really and tremendously revealing. This year, we've done a little project on tax preparers. We go out pretending to be tax payers ... we've done it at 170 different tax preparers. Fifty-one of them have prepared bad returns that are just horribly fraudulent. I have some transcripts ... here's one: a tax preparer describes how he's gonna do a 'ho-hum, no muss, no fuss, simple [expletive] return that's gonna get through the system' and he'll never get audited and never get caught. He underreports income then for two years of about $80,000. That he knows. Do you think he knew what he was doing? He was selling our investigator as a taxpayer, 'I know how to cheat without getting caught.' ... We've arrested about 20 this year so far. And there's lots more in the wings."

51/170 is 30%. I don't think that means 30% of all tax preparers are horribly fraudulent--it's likely that the NYS Tax Department is being smart in targetting its secret shopper visits primarily on those tax prep businesses that show suspicious patterns in the returns they've submitted. Mr. Comiskey comes across like a guy who knows how to pick his battles--whether it's which soccer team to play on, or which preparers to visit.

The few professional preparers I've had the pleasure to meet in person have struck me as scrupulously honest, and I believe they would welcome a secret shopper visit. That's probably why they are unlikely to get one. They're also happy that the state tax department is working on putting the bad guys out of business.

Mr. Comiskey clearly has his eyes on the real prize: the deterrence effect. In the response to the reporter's question, "What's the goal?"

"We recovered $2 billion last year and we expect a similar rate this year. That money is the small dollars. The big dollars come from the deterrent effect. ... I see people in three groups. You have the group of people who will always do the right thing, because that's how they are wired. Then you have a much larger group, who do the right thing because of the consequences if they are caught. Then you have the small group of people who break the rules. Chasing dollars is what you have to do. What we're trying to do is move the little group so you can sway them into voluntary compliance."

"Ultimately, the goal is to level the playing field so that the honest ones aren't chumps."

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