State Agency Attributes Delays in Tax Refunds to Anti-Identity Theft Initiative

Department of Treasury says it’s taking extra time processing returns to combat ID theft, stolen refunds

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Still waiting for the state of New Jersey to pay an income-tax refund? You’re apparently not alone.

Due to stepped up efforts to prevent identity theft – a growing problem experienced by many taxing entities around the country – New Jersey’s Division of Taxation said it is taking a little extra time to process some returns this year.

The goal, the agency says, is to make sure refunds are paid to those who deserve them even if it means delaying some to be certain.

“We have been telling taxpayers since February that some refunds could be delayed this year because of increased efforts to combat identity theft,” said Joseph Perone, a spokesman for the state Department of Treasury.

“Maintaining the security of taxpayer information is of paramount importance to the state Division of Taxation,” he said.

New Jersey had already processed roughly 1.4 million electronic returns by the beginning of March, up 7 percent compared to the same period last year, he said. But it’s those returns that can lead to trouble if someone is able to obtain critical information like a Social Security number in an attempt to steal a tax refund. Once the money is out the door – often sent to a prepaid card that’s very tough to track – it’s much harder to prevent the theft.

Last year, the state caught more than 10,000 fraudulent or erroneous refund claims, Perone said. And this year, he said, additional procedures were adopted.

That’s resulted in 950,000 returns out of a total of 3 million that have been processed so far getting “extra scrutiny” after potential red flags were detected. Though state taxation officials determined most of those returns were legitimate and refunds were subsequently issued, about 50,000 returns are still being reviewed, Perone said.
Delayed income-tax refunds can be one of the things that upsets taxpayers the most, especially when, like many filers who expect to get money back, they submit their income-tax returns well before the April 15 deadline.

Gov. Chris Christie fielded one such complaint on Monday night from a woman named Joanne who called into his monthly radio show on NJ 101.5 FM.

“I filed the last of week February,” she told Christie. “I have not received anything.”

“I’ve waited long enough,” she continued.
Christie was sympathetic. “You’ve waited more than long enough,” he told her.

Christie directed the state Treasurer Andrew Sidamon-Eristoff to intervene and give the caller an answer by the next day.

The exchange prompted Eric Scott, the host of the radio show, to say he’d also been told by his tax preparer that New Jersey returns were taking a little long to process this year.

[related]This isn’t the first time during Christie’s tenure, which began in early 2010, that questions have been raised about delayed refunds. Problems experienced in 2013 that dragged into July were blamed on an overaggressive computer-screening system that was being used at the time to check for fraud. Some returns were eventually processed manually , Treasury officials said at the time.

Tax-refund fraud has been a growing problem nationally, and a report issued last year by the U.S. Government Accountability Office recommended improved anti-identity theft procedures after the federal Internal Revenue Service blocked about $24 billion in fraudulent refunds during the 2013 tax-filing season – but still paid out an estimated $5.2 billion in unwarranted refunds.

“Tax refund fraud associated with identity theft (IDT) continues to be an evolving threat, one that imposes a serious financial and emotional toll on honest taxpayers and threatens the integrity of the tax administration system,” the report said.

Earlier this year, several neighboring states took precautions after problems were detected with TurboTax software, one of the more popular e-filing providers. Parent company Intuit suspended some state-level filing operations in February in the wake of suspicious activity where identity theft was a concern.

“Nothing is more important to us than the safety of our customers’ data,” said Brad Smith, Intuit president and chief executive officer, at the time.

Though the TurboTax issue didn’t seem to impact New Jersey, the state said it was prepared nonetheless.

Anyone who is concerned this tax season that they may have been the victim of identity theft should contact the Division of Taxation to report the suspected fraud.

If the state needs additional information to process a tax return, officials pointed out, it will contact the taxpayer directly in writing.