WASHINGTON, DC and ATLANTA– LexisNexis® Risk Solutions, part of RELX Group, today announced the results of a research study on identity theft-related tax refund fraud in the states. The study, commissioned by LexisNexis and conducted by the Governing Institute, examines the perspectives of taxpayers and state government officials on the rising problem of identity-based state tax refund fraud.
“This research is the first of its kind that looks at the problem of income tax refund identity fraud in the states from both the state government and taxpayer perspectives,” said Haywood Talcove, CEO, Government, LexisNexis. “The findings reveal a concerning disconnect: while identity-based tax refund fraud is a top priority for states with 86 percent of government respondents calling it a ‘major problem,’ only a third of taxpayers are ‘extremely concerned’ about it. The good news is that taxpayers surveyed said they are willing to do their part and support measures implemented by states to prevent the fraud altogether.”
To assess taxpayer perceptions, the Governing Institute surveyed 2,013 qualified U.S. residents who submitted a 2013 tax return in one of the 41 income tax-collecting states. With regard to taxpayers, the study revealed the following:
- Sixty-two percent of taxpayer respondents are aware of individuals filing fraudulent state income tax refund claims, but only 33 percent are “extremely concerned’ about it.
- The taxpayers surveyed think it is more common for criminals to use stolen identities for fraudulent credit card applications (85 percent) than for filing fake income tax returns at the state or federal level (53 percent).
- Taxpayers surveyed are very supportive of the proposed procedures being implemented by the states to reduce the number of fraudulent returns. An overwhelming majority (96 percent) were receptive to the state presenting them with a series of questions that only they would be able to answer to verify their identity. Eighty-five percent were supportive of a delayed payment of the refund while the matter is investigated. Seventy-nine percent were supportive of the idea that their state might share their data with another state.
- Eighty-three percent strongly agree that the state government should be responsible for ensuring that their state income tax refund is sent to the correct individual.
To assess government perceptions, the Governing Institute conducted 31 in-depth telephone interviews with state government officials in income tax-collecting states.
- The majority (86 percent) of the state-level government executives interviewed feel identity theft-related tax refund fraud is a “major problem,” and one that is growing.
- The majority (61 percent) of the states are keeping benchmarks and metrics to help establish how much identity fraud is taking place or being prevented; however, estimating the percentage of tax refund identity fraud is still difficult for states.
- States have a variety of procedures in place to protect the state and consumers from the number of fraudulent income tax refund payments paid due to identity theft. Most states share data and/or resources with other agencies to help identify and recover fraudulent state refunds. Eighty-one percent of the surveyed respondents from the states also indicated they pursue tax refund identity fraud criminally.
- While states feel their current processes and procedures assist in identifying tax refund fraud, states reported they are not able to satisfactorily combat identity fraud within their state tax refund process. In doing so, they cited multiple reasons, including the sheer magnitude of the problem, limited time and resources, the inability to share information across states and lack of predictive analysis.
- Five states (Georgia, Louisiana, New York, Indiana and California), two of which LexisNexis supports with its Tax Refund Investigation Solution, were identified by their peers as industry leaders in combating state tax identity fraud.
About LexisNexis Risk Solutions
At LexisNexis Risk Solutions, we believe in the power of data and advanced analytics for better risk management. With over 40 years of expertise, we are the trusted data analytics provider for organizations seeking actionable insights to manage risks and improve results while upholding the highest standards for security and privacy. Headquartered in metro Atlanta USA, LexisNexis Risk Solutions serves customers in more than 100 countries and is part of RELX Group, a global provider of information and analytics for professional and business customers across industries. For more information, please visit www.risk.lexisnexis.com.