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E-filing software companies cite big problem of tax-return fraud

Many Americans prefer to e-file their taxes each year. It tends to be faster and easier than working with paper, and it usually results in a faster refund. Filing with software like TurboTax or H&R Block does cost money, but the convenience usually outweighs the cost.

If you're an e-filer, imagine the following scenario. You gather all necessary documents, sign in to TurboTax and fill in your information, only to discover that someone has already filed a tax return using your Social Security Number. Cybercriminals are especially busy this year, and this scam has the IRS pushing software developers to get serious about online security.

The company facing the most scrutiny right now seems to be Intuit, which owns and operates TurboTax. Not only has TurboTax been tied to some suspicious or fraudulent returns, but two former Intuit employees have accused the company of processing returns that it allegedly knew were filed by cybercriminals. Intuit has patently denied these allegations.

In many ways, this scandal is indicative of the larger online security problems companies are facing. There are a number of effective ways to verify that when John Smith's tax return is filed, it is actually John Smith who entered the information and submitted it. Most are cost-effective and minimally inconvenient.

Yet many companies are unwilling to invest in the extra costs and efforts, in part, because they worry that customers will not put up with even minor inconveniences associated with increased security.

As you file your own tax return this year, please take a few minutes to determine that you're using the most secure software possible, and that you have not become a victim of tax-return fraud.

Source: Accounting Today, "Tax Prep Software Vendors Urged to Authenticate Tax Filers," Michael Cohn, March 5, 2015

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