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TurboTax Resumes State Filings Following Fraudulent Activity

TurboTax has resumed filing state income tax returns, less than 24 hours after suspending operations due to fraudulent activity.

It’s well documented that the federal government was looted of $5.2 billion last year alone as identity thieves used real Social Security numbers to file phony claims to collect refunds.

Now the criminals have broadened their scope by targeting states. On Thursday, several states notified TurboTax of suspicious returns. In fact, a news release from Alabama reports that 16,000 tax returns have been flagged as possibly bogus, all of them filed using TurboTax.

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Intuit, the software company that makes TurboTax, responded swiftly. All state filings were suspended while internal and external security teams pored over the information. The result —TurboTax was not hacked. According to the company, there was no data breach.

“Nothing is more important to us than the safety of our customers’ data,” said Brad Smith, Intuit president and chief executive officer. “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.”

So what happened? Intuit spokeswoman Julie Miller told The Wall Street Journal that the problem could be as simple as the bad guys guessing weak passwords.

According to the state of Utah, the fraudulent returns were sophisticated. Instead of containing made-up information, the 2014 fraudulent returns closely mimic data found in legitimate 2013 returns, indicating that the ID thieves successfully accessed individual TurboTax files. Utah’s tax department spokesman Charlie Roberts said, “We don’t know if the fraudster got the information directly from TurboTax, from the cloud, from the cloud provider, or some other means. We just know that our systems weren’t compromised.”

TurboTax is the nation’s largest online tax software company with nearly 30 million customers annually, and 21 million state returns filed last year.

So where does this leave you if you use TurboTax? The company has put stricter controls in place, including “the implementation of Multi-Factor Authentication, a proven technology for protection against identity theft,” according to a company statement.

Intuit has also set up a toll-free number to answer questions: 800-944-8596.

Free identity-protection services and free credit monitoring will be offered to affected customers.

In addition, the company will help you submit your return if you’re the victim of a phony return filed through TurboTax.

Federal tax returns were not impacted by this issue.

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