Identity theft and state returns

[SaraEA]

Something is going on with state tax filings by identity thieves. I am aware that last week so many states stopped accepting returns from Turbo Tax because of fraudulent or suspicious filings that the software company stopped filing state returns for a day. TT decided it had not been hacked but many prior users were responding to a fake email to "update your information" and voluntarily gave away their personal info, which the thieves then used to file bogus state returns.  Not sure if I believe that, but what I find perplexing is why state returns?  Why not go for the federal with its juicy refundable credits?  Sure some states have those, but nowhere near the size of the federal EITC, education credits, ACTC, etc.

 

Today a client showed me a 1099G  from a state halfway across the country for a 2013 refund from a MFJ return. She is single, never even visited that state, but the name and address were correct (which is how she got the 1099 delivered). Another client who is a CT resident called when he got a refund check from CT (again correct name and address) but hasn't filed his return yet.  I know CT added some new filters and anything that seemed abnormal was issued a check rather than direct deposit. In this case the thief was foiled because the real taxpayer got the stolen money.

 

In our office we get 2-3 cases of identity theft every year. It used to be mostly deceased taxpayers. Last year it was four living clients. When a return rejects because the SS number already filed, we usually delete the federal efile and go ahead and efile the state. This has always worked until last year, when one of our victim's state return rejected as well because the taxpayer had already filed.

 

Anyone have any idea why identity thieves are suddenly going the state route?

[jklcpa]

Maybe it's because the states don't have as elaborate detection systems as the IRS does, at least that is what one article I read was saying.

 

http://www.reuters.com/article/2015/02/11/column-weston-taxfraud-idUSL1N0VL2SG20150211

[Jack from Ohio]

The scammers have chosen the states because no one would think they would.

 

http://www.tax.ohio.gov/IdentityTheft-IDQuiz.aspx  This is what Ohio is doing.  Thousands have been sent so far.

[Lion EA]

If I file early, then an identity thief cannot file a federal, CT, or IL, return using my SSN.  But, he can file in other states.  Lots of other states.

[mcb39]

Last year, my WI returns rejected also in identity theft cases.  They never used to. 

 

I had a call last night from a gal who had identity theft in 2012.  That had all gotten taken care of.  Yesterday, she got a letter from the IRS saying that she owed $30,000 some dollars for 2012, but it was not her SS#, but was her correct name and address.  She is no longer my client due to divorce, so I won't have to fix this one (again)!

[SaraEA]

The advice to "file early" to prevent an identity thief from filing for you has been given by many sources, particularly after the Anthem breach.  The problem is that the professional tax prep system does not have the capacity to file everyone early. We can hardly handle the crunch of returns coming in right now (with loads more to come).  What would we do if ALL our clients give us their data the first week of February? Unless we can extend the number of hours in a day and the number of days in the week, and override the human need for food and sleep, there is just no way everyone can file early.

[joanmcq]

And it doesn't work when many clients don't get investment 1099s or K1s until much later.

[Pacun]

About 5 years ago, MD was giving state refunds to people with W-2 regardless of the SS# number on the return. A lot of regular people using a fake social security number would file with that social security number and the tax preparer would add three dependents to the return and get whatever they withheld and EIC from MD.

One day I got a call from someone who wanted me to prepare ONLY the MD returns. I said, I will have to charge you for the whole federal and state return and he said no problem. I always ask for new people to bring a copy of the return previously filed. When I said, where are these three children, he said, I don't know. The preparer gave me that information and I want to file like last year. I told him that what he did was illegal and the we didn't do that. That if he wanted, I could apply for an ITIN and that I normally filed electronically. I gave him his papers back.

 

About 4 years ago, I posted something here stating that MD was going to go bankrupt if they continue to issue those refunds. I am glad they stopped doing it.

 

On January 28th, I prepared a return for one of my clients who needed his refund badly, but he didn't give me his 1095-A. I told him their refund (MFJ) was going to change but that I was going to file MD so they could get that money. I tried to efile and I got a rejection because the Federal Return was not filed. This will hurt me because when people request their ITINs, I used to file MD electronically when the ITIN was issued.

[FreedomTaxed]

The scammers have chosen the states because no one would think they would.

 

http://www.tax.ohio.gov/IdentityTheft-IDQuiz.aspx  This is what Ohio is doing.  Thousands have been sent so far.

 

Got two of those just this morning. Most everyone who calls or visits about those, are elderly. They just don't understand, and they suspect that the Ohio request is itself an attempt to defraud them.