State Tax Refunds May Be Delayed by Security Precautions in 2016
State Tax Refunds May Be Delayed by Security Precautions in 2016. SOME taxpayers may get their state income tax refunds a little later this year because of extra security measures aimed at preventing fraud.
Some states have warned taxpayers not to expect refunds until after March 1, regardless of how early they file their returns. The Internal Revenue Service has not issued any notice of delays in issuing federal income tax refunds for this year’s filing season, which begins Tuesday. The I.R.S. says about 90 percent of refunds are issued within 21 days.
The state changes are part of an effort to combat fraudulent tax return filings. The Illinois Department of Revenue announced recently that it did not expect to issue any individual tax refunds until mid-March because of heightened scrutiny of returns. In a statement, the department said that fraud prevention efforts from last year’s tax season “illustrate the positive impact that additional delays and scrutiny have had in combating tax return and identity theft.”
Hawaii’s Department of Taxation said added safeguards might delay refunds for “some” taxpayers by as much as 16 weeks. And Utah’s legislature passed a law prohibiting refunds before March 1, unless the employer and the employee had filed all required returns and forms by Jan. 31. “Income tax refunds may be delayed for anyone whose employer does not file electronically by January 31,” the Utah State Tax Commission’s website says.
Next year, most employers will be required to file W-2s, the forms that list earnings and tax withholdings, with the federal government by Jan. 31, said Cari Weston, director of taxation at the American Institute of CPAs. That will allow for quicker reconciliation of information, reducing the potential for fraud. Currently, employers must send the forms to workers by the end of January, she said, but generally have at least another one to two months to get them to the government.
Verenda Smith, deputy director of the Federation of Tax Administrators, which provides services to state tax authorities, said states generally were moving to longer lead times when issuing refunds. “It’s a clear trend,” she said. Authorities use the extra time to match information from multiple sources and make sure refunds go to the correct person. “Speed isn’t the goal,” she said. “Accuracy is the goal.”
Tax return fraud occurs when someone uses stolen information to file a tax return and receive a refund. A victim is usually unaware of the problem until a legitimate return is rejected because a return has already been filed with the same Social Security number. Concern was heightened last February when Intuit, the maker of TurboTax tax preparation software, temporarily halted processing state returns after a spate of suspicious electronic filings.
Since then, the I.R.S. has convened meetings with state tax agencies and major tax preparation software companies to tackle the problem. The groups are now sharing more data to help spot fake returns and have standardized security protocols for online tax software. For instance, users must now use passwords with at least eight characters, including uppercase and lowercase letters, numbers and symbols.
Software providers are enhancing security in general. TurboTax adopted a feature last year that required users to enter a code received on their cellphone to initially log into the program online. This year, users have the option of adding the extra step each time they log on, said Julie Miller, a spokeswoman for Intuit.
Here are some questions and answers about income tax filing in 2016:
■ How can I reduce my risk of tax-refund fraud?
Filing your return early, before an illegal return can be filed, remains a good idea, said Ms. Weston of the CPA institute. “File as soon as you can, and keep your information confidential,” she said. If you use a professional tax preparer, check the preparer’s credentials using the I.R.S. database.
In some cases, the I.R.S. issues a special six-digit code that helps prevent a bogus return from being filed in your name. Known as an Identity Protection PIN, or IP PIN, the code isn’t available to everyone, however. The agency requires confirmed victims of identity theft to use the codes and offers the option of using them to filers in high-fraud areas — for now, Florida, Georgia and the District of Columbia. The agency may also send letters to some taxpayers “inviting” them to use an IP PIN. Once you have a special code, you typically must continue using one. The agency sends you a new one each year.
States may also issue their own PINS for state returns, separate from the federal codes. Check with your state tax agency’s website for details.
The I.R.S. offers more security tips on its website.
■ How can I get my refund as quickly as possible?
The I.R.S. says the fastest way to get a refund is to check your return carefully for accuracy, file it electronically and have your refund deposited directly into a checking or savings account.
■ When is the tax filing deadline?
Federal filers will get three extra days to file this year, because of a local holiday in the District of Columbia. Tax filing day this year is April 18, rather than the traditional April 15. Some state deadlines may be even later.