February 12, 2013

SC agency says it has increased tax-return security since hacking

The SC Department of Revenue said Monday that state tax returns will pass through a new security program this year to try to prevent crooks from stealing refunds.

State tax returns will pass through a new security program to try to prevent thieves from stealing refunds, the S.C. Department of Revenue said Monday.

Hackers stole financial information belonging to 6.4 million consumers, their dependents and businesses from the Revenue Department last fall. The theft was the nation’s largest at a state agency.

Some taxpayers and lawmakers have raised concerns about thieves using the data to file false returns. But Revenue Department officials said Monday they are taking steps to prevent that. Questionable state returns will trigger a letter asking taxpayers to provide additional identifying information by going online or calling the agency, spokeswoman Samantha Cheek said.

The fraud detection program from LexisNexis will cost $1 million to $3 million, depending on the amount of bogus refunds prevented, Cheek said.

The program is expected to triple to $12 million the amount of fraudulent refunds prevented. Using the same program, Georgia prevented $21 million in bogus refunds last year.

Revenue officials weighed adopting the security system before the breach was exposed last fall but decided to start after the hacking, Cheek said.

Hackers took information from state returns filed electronically. Paper filers were not affected.

Revenue Department officials expect to have to spend from $300,000 to $400,000 more this year to process an increase in paper returns from taxpayers concerned about the security of electronic filings.

The state has spent more than $20 million on breach-related remedies, including $12 million for a year of credit monitoring for hacking victims. In the wake of the breach, state agencies also have requested nearly $100 million in computer-related upgrades in next year’s budget.

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