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The Utah Tax Commission is working around the clock, doling out overtime as it sifts by hand through thousands of income-tax returns flagged for possible fraud.
Friday, fingers were pointed at TurboTax, the most popular tax-filing software in the field with a reported 30 million U.S. customers. TurboTax temporarily suspended e-filing of all state-income tax returns in Utah and all other states then resumed state e-filings Friday afternoon.
TurboTax company Intuit said the suspension was a "precautionary step." The company indicated the problem did not stem from a security breach of its systems.
The company's suspension came one day after Minnesota stopped accepting TurboTax filings and Utah officials announced they had confirmed 28 fraudulent tax filings filed from that service and flagged 8,000 suspicious ones.
"Our fraud-detection system actually kicked out those returns to say you need to hand check these returns and you need to contact the individual taxpayers," Utah Tax Commission Chairman John Valentine told The Salt Lake Tribune on Friday.
Some 200,000 Utah tax returns were filed electronically last year and the agency was hoping to push that to the 1 million mark this year — about 80 percent of all returns. While that was the expectation "at the beginning of the week, I don't know what's going to happen now," Valentine said.
He repeated assurances in an earlier prepared statement that officials are "very confident" the state computer system has not been compromised.
The issue he said was personal information obtained from other sources being used to falsify returns, with financial details altered to show larger refunds were due and bank-account routing numbers substituted so the money "would go into the fraudsters' bank account."
State and federal prosecutors have been brought into the investigation.
The IRS wasn't saying much Friday.
"It's not an Internal Revenue Service issue," said spokesman Bill Brunson.
"Taxpayers should continue to file their tax returns as they normally would," the agency said in a statement. "The IRS continues to accept and process tax returns and refunds, and the filing season has started successfully. Through Jan. 31, the IRS had accepted more than 14 million returns and issued 7.6 million refunds."
Valentine, who has been participating in twice-a-day conference calls with tax officials in other states, said he didn't have knowledge of the IRS side of things.
"One could speculate that if the data is incorrect on the states' [filings] that it's likely there would be problems with the federal, but we don't have any actual knowledge of that," Valentine said.
While Utah officials are confident the state's system is secure, the issue could go beyond TurboTax filings.
"We anticipate we will have other problems as information that was stolen from whatever source it was stolen from gets used by other [tax] preparers. But at this point in time we're seeing it primarily from TurboTax," Valentine said.
One thing that is almost certain is that Utahns will see delays in getting refunds.
"We are going to manually have to do things we have done in the past electronically," Valentine said. "And we're having to contact taxpayers [with flagged returns] individually and that takes a lot of time.
"Right now we're handling it with overtime, but if the problem becomes more expanded we'd have to hire additional seasonal help."
The agency urged taxpayers to contact their e-filing vendors for questions.
Intuit published a toll-free number, 1-800-944-8596, for support and filing assistance. The company said it would provide customers free credit monitoring, access to all versions of its software or offer the free assistance of an expert to prepare taxes for affected customers.
The Utah Tax Commission said it would take questions from taxpayers worried about fraud at 801-297-3844 during normal business hours.