TurboTax halts e-filing for state returns due to fraud, stealing of refunds

Intuit INTU, -4.23%  , the parent company of TurboTax, has stopped e-filing all state tax returns due to increased suspicion of fraud.

The company says it is investigating criminal attempts to use stolen data to file fraudulent returns and claim refunds, after hearing concerns from a handful of states, Intuit spokeswoman Diane Carlini told MarketWatch. After a preliminary examination with security experts, Intuit believes its systems weren’t breached, but crooks may have used TurboTax software to file fraudulent returns after stealing identities, she said.

Intuit said in a release that “the information used to file fraudulent returns was obtained from other sources outside the tax preparation process.” The company called pausing e-filings to states a “precautionary step.”

Utah, the first state to reach out to Intuit, issued a notice Thursday saying the state tax commission has discovered 28 fraud attempts that “originate from data compromised through a third-party commercial tax preparation software process,” as well as 8,000 returns flagged as potentially fraudulent.

Minnesota’s Department of Revenue also said in an online notice that it has stopped accepting returns from TurboTax. The Alabama Department of Revenue posted a similar warning after flagging 16,000 potentially fraudulent returns sourced back to tax preparation software.

“We understand the role we play in this important industry issue and continuously monitor our systems in search of suspicious activity,” Brad Smith, Intuit president and chief executive officer, said in the release. “We’ve identified specific patterns of behavior where fraud is more likely to occur. We’re working with the states to share that information and remedy the situation quickly.”

TurboTax customers “do not need to take further action” and returns that have been filed and put on pause will be submitted when the company resumes filing. Federal tax return filing has not been affected, according to the release.

Carlini, the Intuit spokeswoman, told MarketWatch Friday afternoon that TurboTax has not yet resumed filing in any states but hopes to begin lifting the freeze later in the day.

Intuit’s claim that fraudsters are using TurboTax to quickly file fraudulent returns after stealing identities elsewhere comes at a time of heightened concern about data breaches. On Wednesday, Anthem Inc., the second-biggest health insurer in the U.S., said hackers cracked into a database with the Social Security numbers, names and other personal information of about 80 million customers.

Also see: 5 things to know about the Anthem breach

In the hands of a criminal, this kind of personal data makes filing a fraudulent tax return easy. Intuit is considering additional authentication methods to its tax software to ensure the individual using TurboTax is in fact the taxpayer whose name is on the documents, Carlini said.

Also see: 4 tax scams to watch out for

MarketWatch.com – Top Stories

You may also like...