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Tax season is also identity theft season. And according to the D.C. Office of Tax and Revenue, those filing fraudulent returns have been having a field day in recent years.
Last year, the office caught around 25,000 returns, which were fraudulently requesting some $36 million. “Of course we don’t know what we didn’t stop,” says Stephen Cordi, the District of Columbia’s Office of Tax and Revenue. And then there were the hundreds of returns that the office only caught after a real taxpayer came forward, meaning that the money was already out the door.
So OTR is taking new precautions, some of which might affect how long it takes for you to get that refund check back.
The first is a fraud management system that compares information on returns to that in a massive database. If it finds a possible identity theft fraud, the office will send a letter asking recipients to provide a copy of a license, utility bill, or other documents that can verify ID. This system is already in place in around 20 states, according to Cordi.
As of about a week ago, about 10 percent of applicants in D.C. were receiving the letters. “We’re hearing back from largely legitimate taxpayers, but of course people who are thieves don’t respond,” Cordi says.
The second step, which is just being rolled out now, is a LexisNexis search that compares returns to taxpayer identification records. If they are inconsistent, the taxpayer is instructed to answer a four-question quiz (it’s the kind where they ask things like “which of these addresses have you previously lived at?”) People who fail the quiz get a second shot with a different set of questions; if they fail again, they’ll have to go to OTR in person to sort the issue out.
Several states also use the system, though Cordi says D.C. looked most closely at how Indiana and Louisiana implemented the program. The first of these letters will go out this week.
Finally, OTR is temporarily suspending new direct deposit requests. Anyone who has previously used it will still get their return in that manner, but people who are requesting a direct deposit for the first time will receive a check. The idea is that if a thief has used a real address, the check will be sent to a resident with the instruction to call OTR if it wasn’t meant for them. Next year, the office plans to have a place to vet accounts before authorizing new direct deposits.
All this means that it’ll take longer for people to get their returns back. The new systems add two or three days for people whose returns aren’t flagged. For those who do receive letters asking for additional information, it all depends on how long they take to send it in. “The delay largely depends on how quickly you react to our letter,” Cordi says.
OTR encourages taxpayers with questions or issues to call their customer service number (202-727-4829) or visit them during walk-in hours, which have been extended to include Saturday mornings.
Rachel Sadon