Some taxpayers will have to wait longer to get a tax refund from the state of South Carolina this year.
The state Department of Revenue announced Monday that some taxpayers who requested their refund be deposited directly into their bank account will instead be mailed paper checks due to fraud concerns.
“Very simply, criminals are filing fake tax returns in an attempt to steal people’s tax refunds,” agency director Rick Reames told South Carolina Radio Network, adding there has been a significant increase nationwide in fraudulent income tax returns filed this year. “What we want to do is twofold: We want to make sure that the correct taxpayer gets the correct refund. We also want to prevent and deter future criminal activity like that.”
He said identity thieves will often use a name and Social Security number to file a fraudulent tax return. That thief will then attempt to have any refund deposited into an online banking account they control.
Reames said the paper refunds were sent out starting last week. He did not say how many refunds were affected, adding only that they had been “red flagged” by officials reviewing the documents. Not all direct deposit requests were affected.
“We’ve isolated a number of returns that may have been in this red flag category, reviewed them, and made a decision to convert electronic direct deposit into paper checks,” he said. Reames said SCDOR does not release the details of what those “red flags” are, but did say it dealt with filing history and changes on the submitted form compared with prior years.
He emphasized that those who have their direct deposit switched did not necessarily have their identities stolen by thieves. He also said the increase in fraud is occurring nationally and is not believed to be connected to the 2012 hacking of several taxpayer information databases.
SCDOR said it expects only a minor delay in sending out the additional checks.
The company that sells the tax filing software TurboTax briefly stopped providing state return help over security concerns after thieves appeared to shift their fraud efforts from federal tax returns to states, which tend to have fewer safeguards in place.
That shift has led to a 3,700 percent increase in fraudulent refund filings this year in some states, according to the cybersecurity news site Krebs On Security. The IRS identified 85,385 fraudulent federal tax returns involving identity theft in 2013, the Krebs report stated. But that number dropped to just 28,076 returns last year.
Intuit has resumed offering the service.
If a taxpayer receives a paper check refund, but has not actually filed a state tax return for 2014, SCDOR is asking the taxpayer not to cash the check, but instead call the SCDOR customer care line at (803) 898-7638. That line is staffed Monday through Friday from 8:30 a.m. until 5:00 p.m.