TurboTax, the country's most popular do-it-yourself tax preparation software, said Friday that it has temporarily stopped processing state tax returns because of an increase in fraudulent filings.
State agencies have reported a rise in filings with stolen personal information, said Intuit, the company behind TurboTax.
Most victims found out that a fraudulent tax return was submitted in their name when they received a rejection notice after filing their returns, said Intuit spokeswoman Julie Miller.
There haven't been issues with federal returns to date because the Internal Revenue Service has implemented stronger fraud detection policies, Miller said.
Intuit is working with security company Palantir to investigate the problem. So far, there has been no security breach of its systems, the company said. Instead, it believes personal information was stolen elsewhere and used to file returns on TurboTax.
Miller linked the problem to recent security breaches at large companies. Just this week, Blue Cross Blue Shield insurer Anthem Inc. said hackers gained access to the Social Security numbers, names, addresses and other personal information of about 80 million people. It follows other security breaches at JPMorgan Chase and several retailers, including Home Depot and Target.
"You have a pretty rich pool of data out there in the world," Miller said.
Intuit said state tax returns already filed when the halt began Thursday would be transmitted as soon as possible. Consumers can still use TurboTax, and the company will file the state tax returns when the halt is lifted.
TurboTax processed 30 million tax returns last year, Miller said.
Rival H&R Block Inc., which also sells tax preparation software, did not respond to a request for comment.
Another tax preparer, Liberty Tax Inc., said it is letting TurboTax customers file state returns for free at its more than 4,000 locations around the country.