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With An Eye Out For Fraud, Tax Department Resumes Refunds

The Vermont Department of Taxes is sending refunds out to Vermonters again, less than a week after it put payments on hold over fears about fraudulent tax returns.

With the latest announcement, the department seems confident in its fraud detection systems, but officials say the problem of fraudulent claims is growing.

"In 2014, the department detected and stopped more than 800 fraudulent returns saving the state of Vermont more than $1.5 million in potential loss," the release said. "In response, the department has expanded its fraud detection efforts for the 2015 filing season, working with internal and external partners to add filters to the department’s fraud detection systems."

In addition to software that sniffs out suspicious returns, the tax department has devoted some staff to work on fraud prevention full-time.

"At this point, we pretty much have all [14] of our examiners spending part of their day looking at those reports," said Tax Commissioner Mary Peterson. She said no returns are denied based solely on software - the software flags returns for review, and all of those are then manually examined by a department official.

"Staff manually review individual returns that have been flagged electronically to determine which returns are fraudulent and to pay legitimate requests for refunds as quickly as possible," the department release said. "However, the department does anticipate that the increased screening necessary this year will slow refunds throughout the tax season."

One change some Vermonters may notice, the release said, is a paper check mailed to them even if they requested a direct deposit to their bank account.

"Criminals who file fraudulent returns typically request direct deposit of the refunds to debit cards which are difficult to trace," the release said. The mailed checks are an effort to make sure tax return money finds its way to the right person.

Any Vermonters who receive checks before filing a tax return with the state should immediately report that to the tax department and return the check.

Peterson said Vermonters should file taxes as early as possible, because fraudulent returns are easier to detect when a valid return has already been processed.

The department added this advice for Vermonters who suspect they may be the victims of identity theft:

"If you believe you have become a victim of identity theft, you may complete the IRS Identity Theft Affidavit (Form 14039), and submit it to the IRS and the department. You also should notify the department by calling 802-828-2865 or 866-828-2865 (toll-free in Vermont)."

Update 12:18 p.m. This story was updated with comments from Tax Commissioner Mary Peterson.

Taylor was VPR's digital reporter from 2013 until 2017. After growing up in Vermont, he graduated with at BA in Journalism from Northeastern University in 2013.
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