A “substantial” number of state tax filers in Colorado who requested direct deposit for their refunds this year are instead receiving a paper check in the mail to address concerns about taxpayer identity fraud, a problem that affects hundreds of thousands of Americans each year.
The Colorado Department of Revenue said filers who unexpectedly receive refund checks in the mail — it declined to say how many taxpayers are affected — should not jump to conclusions.
“Receiving a paper check does not mean a taxpayer’s identity has been compromised. It is a safeguard measure,” said Mim Mirsky, a department spokeswoman.
Another scenario where people should be concerned — when they didn’t file a return or weren’t expecting a refund and a check shows up in the mail out of the blue. That could indicate someone filed a return in their name.
“Taxpayers who receive a suspicious refund should not cash the check,” Mirsky said. If they do so, they face interest payments and penalties until they return the money.
For either scenario, taxpayers can call 303-238-7378 to report what happened.
Sending a check to a taxpayer’s mailing address helps verify a refund is going to the right person. And when taxpayers go to cash those checks at a bank, they must show identification, an added level of protection.
“This step is intended to prevent criminals from easily diverting fraudulently filed refunds to their own prepaid, reloadable cards or debit cards because banks have security protocols to check identities when cashing checks,” Mirsky said.
Email and phone scams, oversharing on social media and the popularity of online and electronic filing all have made it easier for criminals to submit tax returns in another person’s name and “harvest” refunds that aren’t theirs, according to the Internal Revenue Service.
Fraud victims sometimes give up Social Security numbers to people posing as representatives of a trusted organization, and some people unwittingly click on attachments or links that make their computer accessible to identity thieves, the IRS said.
More than a half-million taxpayers reported stolen identities on federal tax forms in 2015. To combat the problem, the IRS teamed with state tax agencies, financial institutions and tax preparation services that year under the Summit Security Initiative.
Last year, such efforts have cut by half the number of stolen identities reported by tax filers, to 237,758.
Among the tips the IRS provides to prevent tax fraud are to secure computers where prior tax returns and sensitive information are stored and to avoid responding to phishing emails and phone scams.
Earlier this year, the state’s revenue department mailed out letters asking some taxpayers to verify their identities, and it also delayed processing some returns pending confirmation of a filers identity.
That happened to Melissa Luke, an instructor at Colorado Christian University, who returned to the state after working for four years in Massachusetts as a corporate and motivational speaker.
Luke and her husband were wondering why the state wasn’t processing their return, which H&R Block showed as submitted, when they received a letter stating they needed to verify who they were.
“I completely understand there is a lot of fraud going on out there. But it was strange,” said Luke, who previously worked as a U.S. Treasury agent and fraud investigator.
Complying with the state’s request was somewhat confusing and frustrating, Luke said, but the return was finally freed up after spending three weeks in limbo.
State revenue officials won’t detail what factors they look at when they decide to hold back a return or change a direct deposit to a paper check, saying such information would tip off those behind the tax fraud.
But Luke’s situation of filing a state return after several years of not filing one appears to be a scenario that raises red flags.
