Intuit’s TurboTax–the leading do-it-yourself tax preparation software used by million of taxpayers–abruptly turned off the ability to file 2014 state tax returns citing “an increase in suspicious activity”. This comes on heals of claims of “price gouging” by its customers which caused a major public relations uproar forcing the CEO of TurboTax to pen an apology.
[Intuit] has found an increase in criminal activity where stolen personal data is used to file fake state returns with state authorities. This illegal act allows fraudsters to claim tax refunds from state governments.
An internal TurboTax investigation has found the breaches are not due to a problem with its own systems, but criminals digging up the personal information elsewhere. The company said the investigation is ongoing. Intuit says it’s working with state tax officials to get the e-filing security back to where it needs to be to turn it back on…
TurboTax stopped allowing state tax returns to be filed when the state of Minnesota alerted them that they would no longer accept returns filed thought their product. This was discovered when two Minnesota taxpayers logged onto TurboTax to file their returns and were surprised to find out that their returns where already filed. The state is now reviewing thousands of returns as part of its investigation which at best is sure to delay refunds. No word yet on when TurboTax or affected states will resume e-filling tax returns.
Source: USA Today
The issues with fraud surounding TurboTax may not be limited to State tax returns. The FBI is now investigating claims that the fraud has extended to returns filed with the IRS, putting federal tax returns in jeopardy.
Imagine getting a congratulatory email from TurboTax that your federal return is on file when you haven’t yet filed! Given that virtually everything is electronic these days, that has become a massive issue…
But is anyone completely safe? The IRS estimates that it paid out $5.2 billion in fraudulent tax refunds related to identify theft just in the tax return filing seas (sic) last year. That seems like a bad number until you add the amount of bogus refunds last year the IRS says it was able to stop: $24.2 billion. Still, straightening it out if you are the one hit can be challenging…
If you have been affected by tax return fraud–either using TurboTax or by other means–please tell us about in the comments section.