Iowans who want to use their tax refunds to book a vacation or upgrade the furnace might be waiting longer than usual this year because of fraud-prevention efforts at the state and federal levels.
“It’s a paradigm shift nationally,” said Victoria Daniels, spokeswoman for the Iowa Department of Revenue. “In Wisconsin, they’re telling taxpayers to allow three months. Utah said it wouldn’t issue any refunds until March 1.”
Iowa had issued $141.8 million in income tax refunds on 2016 returns as of March 24, down 58 percent from the $340.2 million in refunds the state had issued at this time last year, Daniels said.
Part of the reason for the delay is a new federal law requiring the Internal Revenue Service to hold refunds until Feb. 15 for people who claim the Earned Income Tax Credit or the Additional Child Tax Credit. This allows the IRS to do additional review of these returns, which are vulnerable to fraud.
Iowa implemented anti-fraud procedures last year after receiving more than 10,000 bogus tax returns in 2015. The agency halted $11.6 million in fake refunds that year, spending $834,969 on the efforts. Similar fraud occurred across the country.
New security procedures include validating bank accounts before making direct deposits and requiring some employers to provide W2 forms the Revenue Department matches with submitted returns. Iowa also uses Geographic Information System data mapping, with algorithms that change nearly every day, to identify fraudsters, Daniels said.
“Criminals file fake returns as soon as possible so they beat the legitimate taxpayers,” she said. “We as an industry have worked collaboratively to share information so we can try to stay on top of it.”
Still, some Iowans aren’t happy about the unexpected delays.
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“They didn’t hesitate to take my money out of my paycheck last year, but getting it back has been a very huge inconvenience. I need that money for more car repairs,” one person posted on the Revenue Department’s Facebook page Tuesday.
“We were just told today we should get ours between today and April 15! We filed Feb 2. Just unreal,” a March 22 post reads.
Daniels is sympathetic, but said taxpayers need to get used to waiting longer for their returns.
“This is going to take time,” she said.
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