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4 Steps For Protecting Your Identity This Tax Season

itheftLast Thursday, as you may have heard, TurboTax put a halt to it’s filing of state tax returns after a spike in suspicious filings. By Friday at 6 p.m., it was back in business. But a number of states that stopped issuing state tax refunds amid similar worries – including Vermont and Massachusetts – have yet to turn the spigot back on.

What’s the deal? In the past couple of years, there has been an increase in fraudulent returns filed in the hope of gaining a tax refund that belongs to someone else. In 2013, 1.6 million taxpayers were affected – and the IRS paid out $5.2 billion in fraudulent refunds. This year, state tax refunds are being targeted in particular.

Why? Because they’re low-hanging fruit.

A fraudster doesn’t even need your name in order to file for your state tax refund as long as he has your Social Security number and date of birth. Typically, the thief files a fake return online and asks for the refund to be deposited on a prepaid debit card. After the refund lands, the money is withdrawn from an ATM and the card discarded. Easy as that.

Importantly, Social Security numbers and birth dates were on the list of data stolen in the massive breach of Anthem health insurance customers.  But Anthem’s wasn’t the only one. There were 783 breaches in 2014, according to the Identity Theft Resource Center, a 27.5% increase over 2013.

This is not just a TurboTax issue, notes Mary Peterson, Vermont Tax Commissioner.  We even get paper returns that are fraudulent,” she said, adding that the state is in contact with not just the e-filing services, but also other states that are addressing the issue. One item up for debate: Whether refunds directed to prepaid debit cards will be halted over the long term. “We are hoping to be back issuing refunds either tomorrow or Wednesday,” she said.

So, what’s a consumer to do in the meantime?

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