Fraud worries force TurboTax to halt state filings

FILE - In this Jan. 24, 2013 file photo, a customer looks at a copy of TurboTax on sale at Costco in Mountain View, Calif.

FILE - In this Jan. 24, 2013 file photo, a customer looks at a copy of TurboTax on sale at Costco in Mountain View, Calif.  (AP Photo/Paul Sakuma)

The parent company of TurboTax, the country's most popular do-it-yourself tax preparation software, halted transmission of state e-filing returns for nearly 24 hours over fears of fraudulent filings.

Intuit said it resumed filing of state returns at about 6 p.m. Eastern time Friday with increased fraud protections, a day after it halted them.

In a statement released on Friday, Intuit said that, along with some states, it had seen “an increase in suspicious filings and attempts by criminals to use stolen identity information to file fraudulent state tax returns and claim tax refunds.”

Minnesota was among the states that noticed suspicious activity. In a conference call late on Thursday, the state’s Department of Revenue said that it was not accepting online returns via TurboTax. Two Minnesota taxpayers notified the state that they had logged into TurboTax and found that a return had already been filed in their name, according to a CBS Minnesota report.

Intuit, which had been working with security specialist Palantir to investigate recent fraud activities, thinks information used to file fraudulent returns was obtained “from other sources outside the tax preparation process.” The fraud is not the result of a breach of the company’s systems, it said in its statement.

Intuit said it implemented targeted security measures to combat this type of fraudulent activity. Part of the steps included the use of Multi-Factor Authentication, a proven technology for protection against identity theft.

“Nothing is more important to us than the safety of our customers’ data,” Intuit CEO Brad Smith said in the statement. “We are taking this issue very seriously and from the moment it emerged it has been all-hands-on-deck. We’ll continue to remain vigilant, but I am more than pleased that we were able to resume transmission for our customers within about 24 hours.”   

The state e-filing halt did not affect the electronic filing of federal income tax returns, Inuit said.

The IRS estimates that it paid $5.2 billion in fraudulent identity theft refunds during the 2013 tax filing season 2013, according to a Government Accountability Office report released in August 2014.

Identity protection specialist IDT911told that identity theft cases rose 135% between 2013 and 2014.

The Associated Press contributed to this report.