TurboTax says software can be used again; Minnesota says not so fast

TurboTax on Friday said it had resumed the processing of state tax filings nationwide a day after Minnesota's Revenue Department quit accepting state returns filed with the tax software.

But Minnesota tax officials said they were keeping their freeze on TurboTax returns for now.

Intuit, which owns TurboTax, said it had halted filings for about 24 hours after it discovered "an increase in suspicious filings" related to identity theft and fraudulent tax refunds on Thursday. Nineteen states have noted potential fraud issues.

Minnesota's temporary halt was prompted by two taxpayers who logged into Intuit's TurboTax to file their state returns only to be told that their returns had already been filed. As of Friday afternoon, the state had not received any other calls about possible fraud. But it had not resumed processing TurboTax-prepared returns.

"We are working quickly to verify Intuit's new security measures and their impact on Minnesota returns," the department said in a statement Friday night. "We will work continuously until we can assure Minnesotans that TurboTax returns will be filed safely."

Intuit, based in Mountain View, Calif., indicated it was continuing to work with states and third-party security expert Palantir. Intuit believes the data breach didn't involve its systems but rather outside sources. The company has identified specific patterns of behavior where fraud is more likely to occur and is working with the states, including Minnesota, to share that information, said Brad Smith, Intuit president and CEO, in a statement on Intuit's website.

Those who have already filed their tax returns through TurboTax don't need to take any new action at this time. Federal income tax returns are not affected by the temporary delay, and taxpayers can continue to file with the IRSvia TurboTax.

The department can't say yet how soon the suspension will be lifted but its representatives are meeting regularly with Intuit, the spokeswoman said.

TurboTax is used by about 60 percent of Americans who use tax software to prepare their own returns, followed by TaxAct and H&R Block, according to a comScore survey. Minnesota has not had issues with other tax preparation software in the past, although there were some calculation issues with TurboTax last year.

Minnesotans whose state income tax returns may have been affected by the data breach will receive a letter from the state. The state is looking over about 2,000 returns, but it doesn't expect to find fraud in all of them, Steenblock said.

Taxpayers with questions can call Intuit at 800-944-8596 from 7 a.m. to 11 p.m. weekdays. Intuit did not indicate if its hours would be extended for the weekend, but it will provide identity-protection services and free credit monitoring as well as free tax-filing assistance to affected customers.

Taxpayers who called Intuit Friday were experiencing hold times of 90 minutes and longer. Nancy Johnson of New Hope gave up after being on hold for 90 minutes. She submitted her taxes via TurboTax Thursday at 6 p.m. and received confirmation that the IRS had accepted her federal return but hasn't received word on her state filing. "I've used TurboTax for lots of years but this will probably be my last year," she said.