The Kentucky Department of Revenue’s (DOR) job is not just to collect taxes, but to get taxpayers the money they are owed as quickly as possible. We are trusted stewards of taxpayer dollars, and we take our responsibility very seriously.
In recent years, identity theft-related tax refund fraud has emerged as a growing epidemic for the federal government and the states, including Kentucky. Why now? Electronic filing, which is the fastest and most secure way for taxpayers to file their returns and was the method used by nearly 85 percent of Kentucky taxpayers in 2015, has created an untended consequence. Fraudsters particularly organized criminal groups take advantage of the anonymity of the Internet and the ease of electronic filing to file fraudulent refunds at scale. The growth in electronic filing along with increasing fraud and abuse attempts, puts an even greater responsibility on DOR to be diligent in its efforts to identify fraudulent returns. We are up to this challenge.
What it means for our taxpayers is that while we strive to get them their money quickly, we do not compromise taxpayer identity protection in favor of speedy refunds. Instead, we work diligently to provide timely refunds to our taxpayers and simultaneously ensure the tax refunds we issue are to the true individual and not to an identity fraudster through a combination of internal and external fraud analysis.
Our approach has worked. We stopped nearly $16.6 million in fraudulent refund requests in tax year 2014.
Still, we seek to continuously improve. And, we’re not alone so do the fraudsters. It is a race to the finish, and we plan to win by staying a step ahead of fraudsters and adapting our processes and technologies to thwart their new methods.