TurboTax Update: FBI Investigating Fake Income Tax Returns

It appears that it’s too soon to close the books on the recent spate of fraudulent tax refunds filed through TurboTax, the country’s leading provider of tax preparation software. According to the Wall Street Journal, the Washington Post and various other media sources, the FBI has launched a probe into whether a computer breach resulted in false income tax returns being filed in about 19 states. The FBI is also investigating the possibility that the fraud extends to federal tax returns.

As we reported last week, TurboTax temporarily stopped transmitting electronic state income tax returns when it became aware that criminals were attempting to use stolen personal information, such as Social Security numbers, to file fake returns via its products and collect refunds. But the shutdown lasted less than 24 hours before normal activities resumed.

TurboTax’s parent company, California-based Intuit, has been working with a private firm specializing in security and anti-fraud services to get to the bottom of the problem. Based on their preliminary analysis, the fraud attempts didn’t appear to result from a security breach at TurboTax, while the information used to file the fraudulent returns was likely obtained from other sources. Now the FBI will be delving into the matter as well.

“Tax fraud is an industry-wide issue and Intuit is actively engaged with federal and state governments, as well as industry associations, to fight fraud,” said a company spokesperson in a prepared statement. “Intuit has not been notified, nor are we aware, that we are the target of an FBI investigation. We work with law-enforcement agencies, including the FBI as appropriate, on matters such as identity theft.”

The Wall Street Journal has reported that a dozen TurboTax users have alleged that people other than themselves filed federal tax returns in their names. Still, in a universe of millions of taxpayers, that’s a relatively small sample.

It’s not surprising that scammers have targeted TurboTax, far and away the largest electronic provider of self-filed returns. Officials at TurboTax’s two main competitors, H&R Block and Tax Act, reiterate that they have not seen unusual levels of fraud activity so far this tax return season.

ID theft of tax information continues to be an ongoing problem for authorities at both the federal and state levels. The IRS has been in a race the last few years to keep up with innovative scammers. This remains one of the top items on the IRS’ annual “Dirty Dozen” tax scams list for taxpayers to watch out for. The IRS posted the list for 2015 in a series of 12 press releases ending on February 6.