Josh Waites, the chief investigator for the state Department of Revenue, arrests Hapeville City Councilwoman Ruth Barr on Jan. 11. The arrest on a perjury charge was part of a state fraud investigation into Barr’s tax preparer’s business.

Georgia blocks $100 million in fraudulent tax returns, so far, in 2017

Despite major data breaches such as the one at Equifax, tax agencies — including the Georgia Department of Revenue — are reporting increasing success in the war to stop fraudulent returns from turning into big money for crooks.

Department of Revenue Commissioner Lynne Riley said the state has blocked $108 million worth of fraudulent returns so far this year.

That’s up dramatically from two years ago, when only $19 million worth was stopped by the agency.

“It is encouraging to see everyone involved in the filing process working together to combat fraud,” Riley said. “It appears the collaborative effort has led to remarkable strides in both deterring and detecting tax fraud.”

A year ago, Georgians were complaining about slower returns at tax time. The Revenue Department slowed refunds in February 2016 as the state implemented a fraud management system and increased scrutiny of returns because of an Internal Revenue Service data breach.

In 2015, criminals used a tool on the IRS website to steal the tax forms of more than 700,000 people. Then in February 2016, identity thieves tried to breach computer systems at the IRS to file for fraudulent refunds. The IRS said it halted the attack and no taxpayer data were compromised.

Still, following breaches such as the one at Equifax that exposed the personal records of more than 145 million Americans earlier this year, the IRS and state officials are more cautious than ever about returns as the tax season nears for most filers.

“If we let that money go (to criminals), we never get it back,” said Josh Waites, the director of the Revenue Department’s Office of Special Investigations.

Waites credits the new fraud management system, plus a state law mandating that businesses send in W-2s earlier, for helping the department do a better job of stopping fraud.

“Basically, for the last few years, we have been analyzing every income tax return for fraud,” he said.

With all the data breaches in recent years,” Waites said, “We’re always cautious, but this (upcoming) year we’re going to be even more cautious. We are not going to release (refund money) until we know we are not sending it to the bad guy.”

He said big fraud generally isn’t a Georgian trying to fudge numbers on his or her return. It’s from American and overseas criminals filing fraudulent returns using information obtained through hacks, breaches or other means. “This is big business,” Waites said.

While data breaches have helped cause an uptick in fraud, Waites said it is something that is hard to quantify since there are so many cases and so much information is available to criminals.

“We’re fearful with something like Equifax because they are getting a lot of information,” he said. “The more information that is out there makes it easier to file fraudulent tax returns.”

The state pays $1.25 million a year for the fraud management system. In under two years, the department says it has blocked more than $200 million in fraudulent returns.

Earlier this year, then-Hapeville City Councilwoman Ruth Barr was convicted of felony theft in Gwinnett County on charges that she stole more than $100,000 from a relative, but an investigation by The Atlanta Journal-Constitution and Channel 2 Action News revealed she may have cheated thousands of people out of much more through her tax preparation business.

Many of Barr’s clients were firefighters and police officers who came to her on promises of large refunds only to find they owe money to the state.

Barr was sentenced to five years in prison, but Waites said, “I personally want to see her banned from filing tax returns for life.”

Support real journalism. Support local journalism. Subscribe to The Atlanta Journal-Constitution today. See offers.

Your subscription to the Atlanta Journal-Constitution funds in-depth reporting and investigations that keep you informed. Thank you for supporting real journalism.