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Utah blocked $11 million in fraud from fake tax returns

Published January 26, 2016 11:51 am

Identity theft • Crooks managed to pocket only a relatively paltry $19,580.
This is an archived article that was published on sltrib.com in 2016, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

The Utah Tax Commission figures that crooks attempted to steal $11 million from the state last year through faked income tax returns that sought refunds. But it says they managed to pocket only a relatively paltry $19,580.

Meanwhile, other states reported losing millions. And Barry Conover, executive director of the Utah Tax Commission, says the federal Internal Revenue Service reported losing $5.8 billion to fraud in 2013.

Conover reported to Utah legislators on Tuesday how his agency is attempting to thwart the attempted fraud, which he says is increasingly common because of extensive breaches of government and corporate databases through the years.



"There is enough data out there for any organized crime organization or any rogue nation to build a profile on any citizen of the United States multiple times. So we have to be on our toes," he told the Business, Economic Development and Labor Appropriations Subcommittee.

Tax Commission Chairman John Valentine said Utah actually broke a huge national fraud scheme last year — where fraudsters were using Turbotax and similar companies to file fake returns electronically with stolen personal information.

Computerized analysis of some of those early returns did not look right, Conover said.

So the state sent people letters asking about the returns they had supposedly sent. "They called us back and said, 'Wait a minute. I haven't even filed a return.'"

Utah halted issuing returns temporarily as it researched returns extensively, and sent more letters out to citizens about suspicious returns. Conover said that prevented sending refunds for bogus returns and then trying to retrieve them later.

He said the IRS tends to send out refunds, and then try to retrieve money later from any fraudulent returns. He said Utah doesn't do that, because "you can't go out and retrieve it because they use those prepaid debit cards, and they go directly to the ATM, cash them out, and they are gone."

Valentine said the IRS initially did not want to confirm publicly the national fraud scheme that Utah had discovered.

Sen. Wayne Harper, R-Taylorsville, said, "The fact that the federal government did not want to admit that the state of Utah found out what was going on … is a great testament to what the tax commission is doing and how Utah is leading out among the states."

Conover said legislators gave the tax commission a new tool when it passed SB250 last year that should help it prevent more attempted fraud.

It requires all employers to file W2 forms, or similar reports on employee earnings and withholdings, electronically by Jan. 31 each year. The state then will match W2s sent in by employees to employers' versions before it will send out refunds.

He said the state also has a variety of computer programs to analyze returns to look for fraud, works with other states to identify schemes, and has worked with tax-filing companies to beef up protections against identity fraud.

"This is to protect the citizens' identity, and also the revenue that the citizens are paying," Conover said. "They want it done right, and they don't want their money taken by some crook."

 

 

 

 

 

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