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February 17, 2015

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Online Filers Should be Wary of Identity Theft

A surge in fraudulent state tax filings in 19 states appears to involve personal information stolen from TurboTax. The FBI is working to determine who used stolen data to obtain bogus refunds from various state agencies and whether federal returns are also involved.

In response to the suspected breach, TurboTax suspended the electronic transmission of state tax returns for 24 hours earlier this month. The company is advising users to log in to their TurboTax accounts to make sure that none of their information has been changed, particularly direct deposit information.

Identity theft has become an increasingly common problem in the tax world, with the IRS doubling the number of workers assigned to investigate identify theft cases since 2011. In 2013, the IRS Criminal Investigation Division initiated 1492 investigations into identity theft refund fraud, a huge increase over the 276 investigations initiated in 2011. These 1492 investigations resulted in more than a thousand indictments. In 2013, Rashia Wilson, the self-proclaimed “First Lady” of identity theft refund fraud, was sentenced to 234 months in prison on charges of wire fraud and aggravated identity theft.

Many individuals have fallen prey to other fraudulent schemes, including phishing. Taxpayers around the country have reported being contacted by scam artists posing as IRS agents. These individuals would often demand personal information or payments under the threat of levies or jail time. The IRS has identified at least 1,100 victims of this type of fraud who have lost an estimated $5 million. When the IRS contacts a taxpayer, the initial contact will almost always be through a letter, rather than a phone call out of the blue. They will never contact a taxpayer by email or text message.

If you fear that you may be the victim of identity theft related to your federal taxes, you should contact the IRS Identity Theft Protection Specialized Unit and fill out the IRS Identity Theft Affidavit (Form 14039).

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