March 19, 2015

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The TurboTax Scam and Its Repercussions

The 2015 tax season was just getting underway when reports of a major identity theft scam surfaced: TurboTax, a popular online tax preparation and filing application, had to temporarily suspend filing state tax returns over fraud concerns.

Users reported that when they logged on to begin the tax preparation process, the TurboTax website informed them that refunds had already been sent. Many of these refunds went to prepaid debit cards, which identity thieves often use because they’re untraceable.

The TurboTax scam sparked an FBI investigation, and now some security experts have suggested that 2015 federal tax returns, in addition to state returns, might be affected as well. Intuit, the company that makes TurboTax, has confirmed that tens of thousands of fraudulent returns were filed in at least 18 states.

Not a Data Breach

At this point, it looks like the problem isn’t a TurboTax hack or data breach, but in fact a large-scale identity theft scam perpetrated by thieves who used the TurboTax website, posing as legitimate taxpayers. These individuals likely acquired stolen personal information through other means, such as previous data breaches or phishing attacks.

Intuit has noted that while its system can spot suspicious returns, the company can only report these suspicions to the IRS because tax returns are the property of the IRS, not Intuit. As a result, TurboTax must send through every return, no matter how suspect it might be.

Experts have advised taxpayers to file tax returns as early as possible, since a thief’s fake return would bounce back if a legitimate return had already been filed. But time is running out for that strategy. If you used TurboTax this year or in previous years, your only recourse is to check your credit report for signs of suspicious activity and to be vigilant about reviewing bank statements and credit card accounts.

Scam Alert

Unfortunately, Turbo Tax isn’t the only avenue used by tax identity thieves. IRS identity theft scams are becoming all too frequent, and the IRS has made it a top priority to stop tax-related identity theft and refund fraud.

In general, tax identity theft occurs when a thief uses a legitimate taxpayer’s identity to fraudulently file a tax return and claim a refund. Scammers use numerous methods to get tax information from potential victims, including phony emails, texts and phone calls. Letters seem to be especially popular among identity thieves because they can be designed to look official and urgent.

Although this is prime season for IRS identity theft, you can take steps to protect yourself and your family, including choosing a reliable tax preparer and checking your credit report. Visit the IRS identity protection webpage to learn how to put other protections in place or to report suspected identity theft scams.

Image courtesy of Flickr user Mike Mozart.

Heidi Daitch

Chief Strategy Officer at IdentityForce
Heidi is a busy working mom who juggles many of the same responsibilities and challenges at home and at work - a long list of things to do and not enough time to do everything. With so little time, Heidi tries hard to find simple, but effective strategies to save time for what’s really important – spending time with her family.

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