MONTGOMERY, Ala. (AP) - Alabama’s top tax official says thousands of legitimate taxpayers who get unexpected letters from her should not panic.
“They did nothing wrong,” Revenue Commissioner Julie Magee said.
The letters are aimed at stopping tax returns filed with stolen identities and cutting down on fraudulent refunds, she said.
Identity thieves filing fraudulent tax returns have become a massive problem for state and federal tax agencies. The average Alabama tax refund is only about $450 and is small compared to federal refunds. But Magee said it’s easy for crooks to file both state and federal tax refunds when they have stolen identities.
The Federal Trade Commission reported that in 2013, identity theft was the No. 1 source of complaints it received nationwide. Alabama ranked 14th among the states in complaints with 74.7 per 100,000 people. Florida ranked No. 1.
Among metropolitan areas in the U.S., the Columbus, Georgia and Phenix City, Alabama metro area ranked No. 2 in complaints about ID theft and the Montgomery area finished 15th. The Miami-Fort Lauderdale-West Palm Beach metro area topped the rankings.
One case currently being prosecuted in federal court in Montgomery involves $20 million in federal refunds that prosecutors say used identities stolen from Alabama’s state government, the U.S. Army hospital at Fort Benning in Georgia, and a credit card processing facility in Columbus, Georgia.
Alabama’s Revenue Department has taken steps in recent years to cut down on the fraudulent returns, including instituting computer screening techniques and asking taxpayers to include their driver’s license number and birth date when filing electronically. Magee said her department stopped 19,000 returns seeking $17 million in fraudulent refunds in 2013.
The numbers aren’t compiled yet for 2014, but she said they will include stopping fake returns that used the names of 18 physicians who work at the University of Alabama at Birmingham.
But despite successes like that, she said attempts at filing fraudulent returns keep growing. On Nov. 3, the department started working with Lexis Nexis to provide another screening step. If something about the return appears unusual, her department contacts Lexis Nexis, and it uses a wide variety of public records to verify the identity.
If it can’t, the tax filer will get a letter from Magee asking them to go to a website (https://revenue.alabama.gov/IDquiz ) to take a short quiz or call the department to take the quiz over the phone to confirm their identity.
She said it will be questions that a legitimate taxpayer should have no trouble answering, such as: You lived at one point in your life on Hollywood Drive. True or false?
Magee figures the majority of the returns that are questioned will be fake and the filers will never take the quiz.
“If they don’t do the quiz, we won’t process their refund,” she said.
Magee expects to mail 17,000 to 20,000 letters from the spring tax filing season.
“We are not trying to stop paying refunds. We are trying to stop paying refunds to people who use your stolen information and file the return,” she said.
The Lexis Nexis system that Alabama is using has already been used by Georgia and Indiana. Magee said the amount the state pays to Lexis Nexis will depend on the volume of identities checked, but she expects it to be around $750,000.
The Lexis Nexis system replaces some screening techniques that slowed down the processing of returns this year and kept the processing from being finished until September, about two months later than normal.
“Our goal this coming tax season is to bother taxpayers less often, but to target just the ones that the identity can’t be verified,” she said.
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