TurboTax halts all state tax filings over fraud concerns

Posted at 2:54 PM, Feb 06, 2015
and last updated 2015-02-06 14:54:05-05

NEW YORK (CNNMoney) — The popular TurboTax software has temporarily stopped processing state tax refund filings in all states after reports of fraud increased.

Reports of an increase in suspicious filings came from a “small handful of states” this week, including Minnesota. The company has stopped processing the forms in all states as it investigates the problem, said Julie Miller, a spokeswoman from TurboTax owner Intuit.

Intuit systems have not been breached, according to a preliminary investigation from third-party security expert Palantir.

Instead, criminals may be using identity information (like Social Security numbers) that were stolen from somewhere else to file fake returns and collect refunds.

In Minnesota, for example, taxpayers have recently found that when they log in to TurboTax, they see that a return has already been filed under their name.

Miller declined to name the other states that have seen an increase in suspicious activity.

“Unfortunately, the bad guys have a lot of places to get information,” she said.

Just this week, insurance giant Anthem was hit by a massive data breach, where information such as names, birthdays, medical IDs, social security numbers, street addresses, e-mail addresses and employment information may have been stolen.

The problem does not effect federal tax refund filings, which have had more stringent fraud controls put in place over the past year by the IRS.

Despite the suspension, people can keep preparing their state returns via TurboTax.

The company said it will process federal returns as usual.

Intuit stopped processing electronic state returns Thursday afternoon and said it will store them securely until it can resume doing so.

It was unclear Friday afternoon if the problems are more likely to happen when using the free version of TurboTax, Miller said.