TurboTax halts state filings amid fraud outbreak

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TurboTax has turned off the ability of its software to e-file state tax returns across the USA Thursday after the company found “an increase in suspicious filings,” the company said Friday.

The tax-preparation software company has found an increase in criminal activity where stolen personal data is used to file fake state returns with state authorities. This illegal act allows fraudsters to claim tax refunds from state governments.

An internal TurboTax investigation has found the breaches are not due to a problem with its own systems, but criminals digging up the personal information elsewhere. The company said the investigation is ongoing. Intuit says it’s working with state tax officials to get the e-filing security back to where it needs to be to turn it back on. TurboTax customers who already e-filed their state returns don’t have to do anything. The returns will be transmitted again when the problem is resolved, TurboTax says.

The e-filing halt only affect state returns. Federal tax returns can still be filed electronically.

Intuit’s move comes after Minnesota’s Department of Revenue says it will no longer accept tax filings submitted electronically using TurboTax, reports the StarTribune. The state says two taxpayers logged into TurboTax to file their tax forms but were told filings were already made. The state is reviewing thousands of other state filings sent electronically.

It’s just the latest headache for Intuit’s TurboTax. This year, users of the software have been outraged by a stealth price hike that forced many investors and self-employed people to pay 50% more for the software. Intuit hopes to put an end to the controversy Saturday when anyone who buys the less expensive Deluxe version can upgrade to the Premier or Home & Businesss version for free.

Shares of Intuit (INTU) are down $3.04, or 3.3%, to $88.65 on the news

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