NYC pays firms that owe millions in past due taxes, Stringer audit says

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New York City’s Department of Finance continues to pay almost 200 contractors that owe the city millions of dollars in past due taxes, according to an audit released Thursday by Comptroller Scott Stringer.

The audit identified an additional $5.7 million in taxes that could be collected by the DOF.

The problems occur largely because of simple oversight failures by DOF that result in a breakdown of its standard process. To increase the city’s tax revenue, Stringer called for more effective DOF payment seizure practices.

“For New York families struggling to make ends meet, every single penny counts – we need to make sure New York City tax dollars are collected in full and are serving our children, seniors, and neighbors,” Stringer said. “Our audit identified a basic way the Department of Finance could collect an additional $5.7 million – that’s enough to fund salaries for 71 teachers for a year, shelter 1,500 homeless families for one month or provide nearly 700,000 home-delivered meals to seniors.”

DOF is responsible for collecting city taxes from private contractors and companies that do business with agencies. If a business working with a city agency doesn’t pay its taxes, DOF can temporarily freeze payments to that firm; unless the taxes are paid, DOF can take the back taxes the city is owed from those frozen funds.

The audit found the DOF routinely pays companies that owe back taxes. While it does temporarily hold payments, it doesn’t take the steps to ultimately collect owed taxes from those funds on hold; the audit found that the DOF has not seized any of that money as payment for city taxes since October 2014.

The audit made several recommendations: Track and measure collection of city tax debt from city vendors; revise procedures to better collect tax debt from city vendors; require staff to take timely steps to deduct vendors’ tax debts from the city’s payments; withhold payment until the debt is collected, vacated by a court or withdrawn by DOF after appropriate documentation has been filed; and if other collection methods fail, deduct back taxes from city payments to offset the $5.7 million in city business taxes owed by city vendors.

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