Turbo Tax Stops Processing State Returns Amid Fraud Reports

Trying to file your state tax return with Intuit's Turbo Tax software? You might run into some trouble.

The tax preparation software company on Friday announced it has temporarily halted e-filing for state returns across the U.S. after it found "an increase in suspicious filings and attempts by criminals to use stolen identity information to file fraudulent state tax returns and claim tax refunds." Intuit is now working with state agencies to address the issue.

"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 CEO, said in a statement. "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."

The announcement comes after Minnesota today stopped accepting tax returns submitted using Turbo Tax software due to fraudulent activity.

"Some Minnesota taxpayers have recently found that when they log in to TurboTax to file their tax return, they see that a return has already been filed," according to a notice put out by the Minnesota Department of Revenue. "Due to this potentially fraudulent activity, we have stopped accepting tax returns submitted using TurboTax."

Intuit said it has conducted a preliminary examination of these recent fraud activities with the help of security expert Palantir, and believes these crimes did not result from a breach of its systems. Instead, the information used to file fraudulent returns was obtained from other sources outside the tax preparation process.

"Intuit will be working with the [affected] states today to begin turning transmissions back on," the company said. Those who have already filed their state tax returns with Turbo Tax do not need to take any further action at this time.

The move does not affect federal income tax return filing, and is limited to states that require residents to file returns. If you believe you have been the victim of tax fraud, call Intuit at 800-944-8596. All affected customers will receive free identity protection and credit monitoring services, plus access to all versions of Turbo Tax or one of Intuit's tax experts who will prepare your taxes at no expense.

In the meantime, check out our roundup of The Best Tax Software for 2015.

The move comes as Anthem healthcare is dealing with a breach of its systems; see more in the video below.

Update: Turbo Tax resumed e-filing of state income tax returns as of Friday at 3 p.m. Pacific. In a statement, the company said it is continuing to work with affected states "as they build their own anti-fraud capabilities."

"Nothing is more important to us than the safety of our customers' data," Intuit's Smith said. "We are taking this issue very seriously and from the moment it emerged it has been all-hands-on-deck. We'll continue to remain vigilant, but I am more than pleased that we were able to resume transmission for our customers within about 24 hours."