Tax Season: Is TurboTax Still Safe to Use After it Suspended State Returns?

February 9, 2015 Updated: February 10, 2015

TurboTax over the weekend suspended the electronic processing of state tax returns before it was resumed a short while later, prompting questions from customers who use the popular tax-filing service.

Intuit Inc., the operator of TurboTax, said that the temporary halt was initiated because of reports of people using stolen identity to file fraudulent tax returns and claim refunds.

Minnesota’s department of revenue said Friday it stopped accepting electronically filed tax returns submitted through TurboTax.

The incident prompted questions as to whether customers should be concerned about using the tax preparation service.

“You should absolutely be worried about TurboTax security issues since multiple states are experiencing duplicate returns being filed. There is a breakdown in the filing process that is allowing consumers confidential information to be compromised,” said Chris Hardy, a certified financial planner who is manages his own firm, Paramount Tax and Accounting, in Georgia.

A former IRS agent, Michael Raanan, who is the president of the Landmark Tax Group, told Epoch Times: “From what we know thus far, [TurboTax] has identified what they called ‘specific patterns of behavior’ which they believe has led to some users filing fraudulent tax returns. It is believed that personal identifiable information, such as social security numbers, were obtained by third parties and used to file the fraudulent returns via the TT system.”

The company stressed that its systems are safe. After a third-party expert investigated the matter, TurboTax said the security breach didn’t come from its own systems.

More security measures will be added to combat fraudulent activities, and the filing of federal returns wasn’t impacted, the firm said in a statement. And the company said the information used to file the fraudulent tax returns “was obtained from other sources outside the tax preparation process.”

“We understand the role we play in this important industry issue and continuously monitor our systems in search of suspicious activity,” Brad Smith, the president of Intuit and chief executive officer, said in a statement.

Intuit spokeswoman Julie Miller said most victims ound out that a fraudulent tax return was submitted in their name when they received a rejection notice after filing their returns.

Miller linked the problem to recent security breaches at large companies. Just this week, Blue Cross Blue Shield 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 and several retailers, including Home Depot and Target.

“You have a pretty rich pool of data out there in the world,” Miller said.

Last year, TurboTax processed about 30 million tax returns.

Tax preparer Liberty Tax Inc. said it’s letting TurboTax customers file safe returns at its approximately 4,000 locations around the U.S. ackson Hewitt Tax Service also said TurboTax customers who were unable to file their state returns could file for free through its online service.

H&R Block, a main rival of TurboTax, hasn’t issued a comment about the fraudulent returns.

The Associated Press contributed to this report.