A few days ago, Intuit, the maker of Turbo Tax temporarily suspended the use of its state income tax filing software due to, what the company referred to as, “an increase in suspicious filings.”  After a couple of days, the company restored the usability of the state income tax filing software.  The issue came to a head recently when Minnesota’s Department of Revenue said it would no longer accept online tax filings using Turbo Tax because of problems with income tax identity theft.  The problem, however, is not with Turbo Tax, but rather with the entire system for filing state and federal income taxes online.  Once they have stolen someone’s Social Security number, identity thieves are finding it quite easy to file a phony income tax return using the Social Security number of the person whose identity they have stolen along with phony W-2 figures claiming a substantial refund.  Since neither the states nor the IRS compare the W-2 figures contained in tax returns with those filed by employers before sending out a refund, income tax identity theft is a low risk, high reward criminal enterprise which cost taxpayers more than 5.2 billion dollars last year in phony federal refunds.


The key to protecting yourself from income tax identity theft is two-fold.  First, protect the privacy of your Social Security number as much as possible and second, file as early as possible in order to beat an identity thief to the punch.