- Associated Press - Friday, January 22, 2016

COLUMBIA, S.C. (AP) - The director of South Carolina’s tax collection agency says delaying refunds, using software to flag suspicious returns and collecting wage documents quicker will reduce the theft of taxpayers’ money.

Those are among the fraud-prevention strategies the Department of Revenue is rolling out this year, said Director Rick Reames.

People should not expect to see a refund before March 1, no matter how early they file. The longer processing, particularly for early filers, allows the agency to verify wage documents. While businesses must send W-2 statements to employees by Jan. 31, state law gives businesses another month to get the documents to Revenue. Legislation would change that. A bill sponsored by Sen. Thomas Alexander would require businesses to turn them in by Jan. 31 too.

“The majority of the fraud occurs early in the tax-filing season,” Reames said Thursday. “We’ve got to move past the model of getting individuals their money as quickly as possible. We have an obligation to get it to the correct person and keep the theft down.”

Former-check-forger-turned-FBI-consultant Frank Abagnale said the government has made it easy for criminals to steal billions of tax dollars by creating fake wage documents.

The IRS estimates paying out $5.8 billion in 2014 to thieves who used someone else’s identity to claim a refund, according to a February 2015 report by the U.S. Government Accountability Office.

Thieves are targeting state governments, too, Reames said, though he declined to give any estimates on fraudulent claims paid by his agency. Abagnale said the goal is to cut such payments by at least 50 percent.

“Criminals would much rather rob from state government than a financial institution. It’s not only the easiest target, but it also has all the money,” said Abagnale, an FBI consultant for four decades, whose life story was portrayed in the 2002 movie “Catch Me If You Can.”

Unfortunately, he said, “If tomorrow I filed a return with the IRS and filed a W-2 that I made up in my mind … they would send me the money. No one would verify that or check that out.”

The Charleston resident has voluntarily advised the state agency, and trained its employees, for more than a year. Abaganale said Reames offered to pay, but he wanted to assist his state for free.

Revenue is asking payroll companies to voluntarily submit W-2 documents to the agency faster. Alexander’s bill aims to convert that request into law.

“It’s all in the interest of protecting the citizens and companies of the state from these individuals and organizations trying to take advantage of that,” said Alexander, R-Walhalla, adding his business already simultaneously transmits W-2s to employees and the government.

He said he’s received no pushback from businesses about his bill.

Beginning this month, the revenue department is using fraud detection software that automatically flags suspicious returns, aiding the agency’s anti-fraud team. Savings to the state are expected to far outweigh the software’s $2 million cost, said department spokeswoman Ashley Thomas.

The slower processing will likely affect about 40 percent of filers - 39 percent of returns last year and 41 percent in 2014 were filed before March 1, according to the agency.

People who file their tax returns before March 1 should expect to get their refund sometime in March, though some may get theirs sooner. Taxpayers filing after March 1 can expect a refund within a few weeks, according to the agency.

The date may change next year, depending on how processing goes this year, Reames said.

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