Iowa finds fraudulent tax returns filed through TurboTax

Iowa is among states reporting a rash of fraudulent tax returns filed through TurboTax tax-preparation software, officials said Friday.

The Iowa Department of Revenue recalled 816 direct deposit refunds Feb. 4 after reports of fraudulent returns in other states. Of those Iowa refunds, 'less than 10” were found to be fraudulent, Revenue Spokeswoman Victoria Daniels said. Most of the bogus returns appear to have been submitted by someone other than the taxpayer whose personal information is included on the forms, she said.

'A small but significant number of those refunds were found to involve identity theft and are the subject of ongoing investigation,” Daniels said in an email to The Gazette.

The revenue department has released the other recalled refunds, but not before some taxpayers tried to spend the money and found themselves overdrawn, Daniels said. The agency received some angry calls this week, but has been working with banks to waive overdraw fees, she said.

The recalled refunds, among 50,000 issued Feb. 4, 'fit a high-risk profile of fraudulent returns,” Daniels said. She would not describe the model used to determine high-risk returns because she didn't want to help fraudsters subvert the system.

The FBI is investigating whether a TurboTax data breach allowed scam artists to obtain personal information from tax filers to file bogus returns in as many as 19 states, the Wall Street Journal reported. Some state officials say it's clear the thieves had access to 2013 tax returns.

Intuit, the company that provides TurboTax, suspended online filings for about 24 hours Feb. 5 and 6, according to the WSJ. Turbo Tax said it found no security breaches and resumed e-filing of state tax returns, but concerns remain. Iowans who see signs of fraudulent tax filings in their name should call the IRS (Identity Protection Specialized Unit) at (800) 908-4490 and the Iowa Department of Revenue at (515) 281-5986. The department also advises taxpayers who discover identity theft place a fraud alert on their credit reports and report the theft to their local police departments.