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TurboTax resumes state tax return filing after fraud-related suspension

The company behind TurboTax, the best-selling tax preparation software in the country, temporarily stopped processing e-filed state tax returns this week after an uptick in fraudulent filings.

The Maryland Comptroller's office believes it has not issued any undeserved refunds but is investigating the matter, said spokesman Andrew Friedson. States including Utah and Minnesota reported fraud, in some cases with residents logging in to their accounts and discovering their return already had been filed and a refund claimed.

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Intuit, the company behind TurboTax, resumed e-filing of state returns late Friday after suspending them Thursday. The company processed 30 million TurboTax returns last year.

Intuit is working with security company Palantir to investigate the problem. The company said there was no security breach of its systems, but officials believe personal information was stolen elsewhere and used to file returns on TurboTax.

"We've identified specific patterns of behavior where fraud is more likely to occur," said Brad Smith, Intuit's president and CEO, in a statement. "We're working with the states to share that information and remedy the situation quickly."

Julie Miller, a spokeswoman for Intuit, linked the problem to recent security breaches at large companies. Just this week, BlueCross BlueShield insurer Anthem Inc. said hackers gained access to the Social Security numbers, names, addresses and other personal information of about 80 million people. It follows other security breaches at JPMorgan Chase, the University of Maryland, College Park, and several retailers, including Home Depot and Target.

Most victims found out that a fraudulent tax return was submitted in their name when they received a rejection notice after filing their returns, Miller said.

Intuit said state tax returns already filed when the halt began Thursday will be transmitted as soon as possible. The company started processing state tax returns late Friday with increased fraud protections, Miller said.

Ben Harris, a TurboTax user for 10 years, said he hasn't filed his taxes yet and is concerned about the reports of fraud. He planned to change his password immediately.

"It's troubling, but it's almost just a given that someone has your information in 2015," said Harris, 32, of Baltimore. "It seems just so prevalent; you hear about a different breach every month. I think in this age, you just have to have a heightened sense of awareness of what people have with your information."

There haven't been issues with federal returns to date because the Internal Revenue Service has implemented stronger fraud detection policies, Miller said.

Mark McLarnon, chief technology officer at CyberPoint, a cybersecurity firm based in Baltimore, said state returns can be more vulnerable to such fraud.

"There are protection mechanisms built into the federal return, the knowledge of adjusted gross income, the e-filing PIN, that are not present on the state return," McLarnon said. "The federal return has strong safeguards."

Maryland Comptroller Peter Franchot's staff disputed the notion that state returns were more vulnerable to fraud and said the agency has made "unprecedented investments" in keeping tax returns secure from cyberattacks. The comptroller's office also hires outside security specialists to perform tests of its computer network and systems.

"The fraud detection and prevention procedures that we have in place in Maryland are every bit as strong, if not stronger, than the IRS's," Friedson said.

Cybersecurity expert Brian Krebs said in a blog post Friday that hacked tax accounts "are cheaper and more plentiful than most people probably would imagine," even showing screen shots from the dark Web offering tax account information for sale for pennies.

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TurboTax customers said customers who believe they were defrauded can call 1-800-944-8596 toll-free. The company also said it will provide identity protection services and free credit monitoring to those affected.

And this may not be the only scam out there involving TurboTax and tax returns.

Brian Cothran of Columbia said he doesn't use TurboTax but received a few emails purporting to be from the service in the last few days, which he shared with The Baltimore Sun. The email address used has been linked to phishing attempts by users in the past. Phishing is a type of email scam in which hackers send emails posing as a company or service in hopes of getting users to type personal information into a site that mirrors the real thing.

"I thought that maybe I should file my taxes as quickly as possible before someone tries to take my return from me," said Cothran, 35. "It's like I got to beat the criminals to my money before they get the chance."

The Associated Press contributed to this article.

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