And even more woes for Intuit and Turbotax

[target2019]

Saw this in today's Wall Street Breakfast report:

Top lawmakers in the House and Senate have begun their own probes into a recent wave of fraudulent tax filings made through Intuit's TurboTax, highlighting a growing problem in the "e-filing" industry. IRS data shows that the issue has grown rapidly, to a record of almost 2M suspected incidents by 2013 from about 440K in 2010. The federal government estimates it blocked about $24B in attempts, but still lost about $5.2B in 2013, due to fraudulent e-filings.

Intuit earnings are out tomorrow, too. That won't reflect the recent bone head moves, but the questions and answers to follow should be interesting.

Intuit CEO Girds for Toughest Tax Season on TurboTax Travails - Bloomberg Business

 

[LOL!]

"… but still lost about $5.2B in 2013, due to fraudulent e-filings."

That $5.2B makes the recent reports of hacker attacks at banks kind of an afterthought.

 

[REWahoo]

I wonder what sort of impact to fraudulent filings we'd see if the IRS stopped offering refunds on pre-paid debit cards? Makes it way too easy to take the money and run...

 

[MichaelB]

I wonder what sort of impact to fraudulent filings we'd see if the IRS stopped offering refunds on pre-paid debit cards? Makes it way too easy to take the money and run...

True, and a very good point. Problem is, almost 10M households have no bank account (FDIC source here). There is surprisingly little (or no) verification of identity (of filers) taking place by third parties, processors, or the Treasury Dept for tax returns.

The greater challenge here is not how to remedy this but how to pay for the remedy. No one wants to pay, be inconvenienced, or jeopardize profits.

 

[audreyh1]

I wonder what sort of impact to fraudulent filings we'd see if the IRS stopped offering refunds on pre-paid debit cards? Makes it way too easy to take the money and run...

Yep!

There are a lot of working poor who don't have bank accounts and rely on pre-paid cards, but this is way too easy a venue for fraud.

 

[rbmrtn]

I wonder what sort of impact to fraudulent filings we'd see if the IRS stopped offering refunds on pre-paid debit cards? Makes it way too easy to take the money and run...

Is that the IRS doing that or just a service offered by the prep companies. Yea that would seem to be asking for fraud.

5 Ways To Receive Your Tax Refund

Prepaid Cards
Many tax preparation companies allow taxpayers to place their refunds onto debit cards for convenience.

 

[audreyh1]

I don't think this article is necessarily more woes for Intuit - I think it's the same story - just more details. Good article!

$24B in fraud prevented, $5.2B got through. The numbers are indeed staggering.

 

[target2019]

I don't think this article is necessarily more woes for Intuit - I think it's the same story - just more details. Good article!

$24B in fraud prevented, $5.2B got through. The numbers are indeed staggering.

I think it is more woe, as Congress is now looking at them. Probably will pull all the other companies in for a talk. Then grandstand and do nothing that's effective.

But the effect is to continue to portray the company in a bad light. Much of it is deserved, IMO.

There's a lot of damage done, and it appears that the stock is in for a serious slide...

 

[jebmke]

Should limit refunds to ACH to pre-noted bank account. That was how my Belgian taxes worked. Almost impossible to transfer money to anyone but the taxpayer.

Checks are a primitive and fraud-ridden form of financial transactions.

 

[audreyh1]

I think it is more woe, as Congress is now looking at them. Probably will pull all the other companies in for a talk. Then grandstand and do nothing that's effective.

But the effect is to continue to portray the company in a bad light. Much of it is deserved, IMO.

There's a lot of damage done, and it appears that the stock is in for a serious slide...

Congress is looking at the whole picture including the tremendous IRS tax return fraud numbers.

 

[audreyh1]

Should limit refunds to ACH to pre-noted bank account. That was how my Belgian taxes worked. Almost impossible to transfer money to anyone but the taxpayer.

Checks are a primitive and fraud-ridden form of financial transactions.

There are a lot of tax payers who don't have bank accounts. They have to be accommodated somehow.

 

[Lsbcal]

Maybe the government needs to allow 2 factor authentication? Would at least protect middle income and higher tax payers like everyone reading this.

 

[braumeister]

There are a lot of tax payers who don't have bank accounts. They have to be accommodated somehow.

How about a transfer (or even mailing a check) to a nearby bank, where the recipient could go in with proof of identity and get the cash? Too much hassle?

 

[samclem]

There are a lot of tax payers who don't have bank accounts. They have to be accommodated somehow.

Hmm, the USPS has suffered from excess capacity and declining revenues. Give them the job of verifying identities and handing over the checks to payees (Treasury transfers $5 per check to USPS for the service?) if a person doesn't have a bank account.

Oh--what about payees without bank accounts or ID? Some people are opposed to making people produce IDs during interactions with the government.

Maybe: No bank account= refunds are available only as a credit toward next year's tax liability?

Anything that makes it tougher to get refunds will reduce the proclivity of people to overwithhold . The loss of that huge amount of ongoing "float" for government use is probably a bigger source of worry to govt fiscal planners than a few billion $ in fraudulent refunds.

 

[MichaelB]

I wonder what sort of impact to fraudulent filings we'd see if the IRS stopped offering refunds on pre-paid debit cards? Makes it way too easy to take the money and run...

Interesting series in the Miami Herald this morning on tax return-filing fraud. It seems there are two significant contributing factors, when combined they create an opportunity for fraud. One is the pre-paid debit card refund. The other is the mandate to the IRS to issue fast refunds - they must process a tax return before the employer has submitted W-2 data to them. Ripping off your refunds: South Florida’s booming tax fraud racket | The Miami Herald The Miami Herald

 

[target2019]

That was a sad read. It was a surprise to me that employee gets W-2 well in advance of the IRS. This hole will probably be patched, but crooks will find another entry point.

 

[audreyh1]

That was a sad read. It was a surprise to me that employee gets W-2 well in advance of the IRS. This hole will probably be patched, but crooks will find another entry point.

True, but that is a huge hole easily patched, the companies already have the data, as it was sent to employees, and when patched it will cut down considerably on the frauds successes.

 

[Spanky]

Yep!

There are a lot of working poor who don't have bank accounts and rely on pre-paid cards, but this is way too easy a venue for fraud.

Why not, many banks offer free checking or saving account without minimal balance.

 

[jebmke]

There are a lot of tax payers who don't have bank accounts. They have to be accommodated somehow.

Somehow, much of the developed world has solved this problem.

 

[audreyh1]

Why not, many banks offer free checking or saving account without minimal balance.

In reality there seem to be a large number of working poor with no bank accounts. Don't know why this persists. Perhaps that minimal balance is still too much of a hurdle.

Issuing wages on pre-paid debit cards (used to be cash) has becomes popular. And then there are all those payday loan places - shudder!!

 

[audreyh1]

Somehow, much of the developed world has solved this problem.

Really? Or perhaps in many developed countries they've already figured people's taxes from wages more closely and refunds are rare?

But I suspect it's more that other countries require banks to offer no minimum checking to all citizens.

 

[audreyh1]

Why So Many Americans Don't Have Bank Accounts | TIME.com

In the South, 9.2 percent of people don’t have an account compared with 7.4 percent in the West, 6.8 percent in the Northeast and 6.4 percent in the Midwest, based on FDIC data.

Canadian banks are required to provide accounts without minimum opening balances to all residents, regardless of employment or credit history. No such rule exists in the U.S

U.S. Lags G-7 in Bank Accounts as Poor Can't Build Assets - Bloomberg Business

 

[target2019]

True, but that is a huge hole easily patched, the companies already have the data, as it was sent to employees, and when patched it will cut down considerably on the frauds successes.

Maybe USG will roll out a patch next month.

 

[audreyh1]

Maybe USG will roll out a patch next month.

Well, it might get Congress off of the IRS back in terms of letting them at least have employer data to double match before issuing a refund. Clearly the "early refund" pendulum has swung too far, and that is exactly what the crooks are taking advantage of.

 

[Clone]

I work with USDA on filing assorted farm forms. The requirement is to do paperwork in person, and that is sometimes a challenge. You can establish a Power of attorney, with multiple IDs, signed in person at an office, or with a notarized signature on special government forms. It seems to me that 'the government' has no problem requiring multiple forms of ID for dealing with many of its entities.

On the other hand, there is tremendous uproar over requiring IDs for voting, and anything that looks like data gathering. Thus, I suspect anything that tries to require better identification for a tax refund will have similar protest.

For my nickle-

I understand how the prepaid card solves a number of problems. So, you pickup your prepaid card in person from one of many sources. Some ID to connect the person to the return, hand print and photo of the person collecting the card, machine prints the card, good to go. Locate the machines at post offices, other government offices. I suspect that some of the Big Box Stores would be willing to have an issuing center located in their building.

I can hear the screams about collecting information. At some point, there needs to be a correlation established between the SSN on the return and the person collecting the cash. The fingerprint would be challenged, yet we collect those for some folks coming into the country. Maybe it is too far. Certainly requiring folks to pick it up in person, and take a picture to attach the face to the SSN seems reasonable to me. It does not close the door to direct deposit into a bank.