Intuit stops TurboTax filings in all states after fraud outbreak

Intuit has halted the transmission of all state e-filing tax returns on worries of rampant fraud, the company said.

During the current tax season, Intuit said that the company and some states have noticed an increase in "suspicious filings" and attempts by to use stolen information to file fake state tax returns, and then claim resulting tax refunds.

Although the company said it did not believe its systems had been compromised, it said it took a "precautionary step" on Thursday by pausing state return e-filings.

"We understand the role we play in this important industry issue and continuously monitor our systems in search of suspicious activity," Brad Smith, Intuit president and chief executive, said in the release.

"We've identified specific patterns of behavior where fraud is more likely to occur. We're working with the states to share that information and remedy the situation quickly. We will continue to engage them on an ongoing basis in an effort to stop fraud before it gets started," he added.

Minnesota said Thursday that it would no longer accept tax returns submitted through Intuit's TurboTax program because it had noticed potential fraud. The state's department of revenue said that some taxpayers filing through the platform had encountered a message that they had already submitted tax returns, despite having not yet done so.

"Due to this potentially fraudulent activity, we have stopped accepting tax returns submitted using TurboTax," the department said in a release, adding its "priority is maintaining the security of private taxpayer data and preventing fraudulent activity within our system."

Tax returns from other Intuit products —including Lacerte, Intuit Tax Online, and ProSeries—will still be accepted, the department said.

The revenue department said its systems had not been breached.

CBS Minnesota reported that the department is currently looking at approximately 2,000 TurboTax returns, and that it has also heard about potential problems in other states.

Intuit said in a statement that it is working with state agencies to address "growing concerns over state tax fraud."

The company said it worked with third-party security expert Palantir to determine that the fraud likely did not result from a security breach of Intuit systems, and that the information used to file the false returns was likely "obtained from other sources outside the tax preparation process."

In a Thursday morning press release—apparently published before Intuit halted its state e-filings—Intuit issued an industry call-to-arms against tax fraud.

"People work hard for their money, pay their taxes, and do their best to be in compliance. Yet criminals steal names and identities to wreak havoc with people and the tax system," Smith said in that release. "Private industry and government need to work together to find ways to take billions of fraudulent dollars out of the hands of criminals and put them back in the pockets of American families where it rightfully belongs."

Internal Revenue Service estimates say that that $5 billion is lost every year through tax fraud and improper payments, according to Intuit.