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TurboTax travails trigger identity theft concerns

Many Americans rely on the software programs to prepare their taxes. Normally that works well, easing the burden of complying with the very complicated U.S. tax code.

In recent weeks, however, f the most popular of these programs, TurboTax, has been linked to numerous cases of tax fraud based on identity theft. In this post, we will update you on the latest developments in that story

The Wall Street Journal reported this week that the FBI has begun an investigation into a possible data breach at TurboTax may be behind the filing of many false returns around the country. State tax returns in approximately 19 states have apparently been affected.

Initially, the concern about false returns filed through TurboTax was focused at the state level. But security specialists are now concerned about federal returns as well.

TurboTax competitors such as H&R Block say they haven’t been affected.

But last week TurboTax’s parent company suspended e-filing of state returns for a full day due to concern about tax refund fraud. The concern was that scammers had accessed the personal information of taxpayers were using that information to file false tax returns.

No one knows exactly how the scammers have been able to obtain so much information from prior tax returns. That is why the FBI has launched its investigation.

In the meantime, the apparent data breach has prompted closer scrutiny of tax returns in some states. This could delay the sending of refunds in some cases.

Of course, tax fraud based on identity theft remains a big problem at the federal level as well. As we discussed in our January 16 post, the IRS has developed a special PIN number for certain taxpayers to use to help prevent such fraud.

Source: The Wall Street Journal, “FBI to Probe Fraudulent Tax Filings,” Laura Saunders, Liz Moyer and Devlin Barrett, Feb. 11, 2015

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