Government

Iowa increases security to prevent tax fraud

More than 10,000 fraudulent tax returns filed in Iowa last year

The Iowa Department of Revenue has upped its security game after seeing more than 10,000 fraudulent tax returns last year.

This tax season, the agency will use technology to better track fraudsters, validate bank accounts before making direct deposits and share information with the IRS, other states, software providers and banks.

“We are following the Fraud Summit initiatives (and) sharing information with the IRS and with industry,” said state Revenue Department spokeswoman Victoria Daniels.

Last year, Iowa was among states that reported a rash of fake state tax returns filed through TurboTax tax-preparation software. In many cases, it was clear thieves had gained access to 2013 tax returns.

More than 10,600 Iowa tax returns were fraudulent last year, which was about 1 percent of all refund claims, the Revenue Department reported. Of those, 2,333 refund claims used stolen identities from Iowa taxpayers.

The agency halted $11.6 million in fake refunds last year, spending $834,969 on the efforts.

This year, the Revenue Department is using “analytics utilizing GIS and new algorithms” to better define fraud rings. Daniels declined to describe how this works, saying she doesn’t want to give thieves a leg up.

Sheila Hoeppner, a Xerox fraud and risk official, explained in a 2014 InformationWeek column the ways government agencies use technology to prevent fraud.

“(Geographic information system) data mapping and visualization can also significantly reduce investigative time,” Hoeppner wrote. “Using a geographic display instead of combing through reams of reports can help a state employee identify suspicious or concerning situations quickly and efficiently.”

The Iowa Revenue Department said it also will analyze bank accounts for fraudulent characteristics before depositing refunds.

“Refunds that are not flagged for errors or refund frauds should not be delayed by more than a day,” Daniels said.

Last year, the agency recalled more than 800 direct-deposit refunds after reports of fake returns in other states. Most refunds were released within a short period, but not before some taxpayers tried to spend the money and found themselves overdrawn.

Many new anti-fraud ideas came out of a security summit the IRS hosted last year in which government officials, chief executives of tax software companies and state tax administrators decided to expand collaboration.

“Eventually, the sharing will take place through a centralized database meant to allow tax companies, states and the IRS to share details anonymously about apparent attacks,” the Washington Post reported this week.

Sharing taxpayer information across public-private lines has required new security agreements, Daniels said.

Some states, including Iowa, are restricting refund deposits on prepaid cards, chosen by some fraudsters because the cards are difficult to track.

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The Iowa Revenue Department has added six temporary employees to assist with phone calls during tax season, which started Tuesday.

The agency’s number is (515) 281-3114.

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