Ky. Dept. of Revenue identifies 22K potentially fraudulent tax refund requests; systems back online after processing halt

04/05/2016 05:50 PM

FRANKFORT — After a brief halt in processing tax refunds the Kentucky Department of Revenue says payments are once again going out and they’ve identified a large batch of potentially fraudulent returns marked for review.

The Department of Revenue stopped processing tax refunds in mid-February for six-days, according to Pamela Trautner, a spokeswoman for the Finance and Administration Cabinet. The stop-down in processing came as a result of a breach of the Internal Revenue Service’s eFile system.

The delay in processing tax returns added additional time to some refunds as the Department of Revenue added additional “safeguards” to protect taxpayers. No personal data was compromised or disclosed by the IRS systems, according to a news release issued in February.

The Department of Revenue originally told filers to expect a 21-day turnaround because it had implemented additional security features and fraud analysis tools this year. The IRS breach added about a week of additional time to that wait during the halt in processing.

Trautner said the current average processing time is 10.8 days, and the revenue department has processed nearly 1.3 million individual returns so far with 98.1 percent being filed electronically.

As the Department of Revenue remits payments and processes returns the dollars owed back to taxpayers actually makes the state money thanks to interest, as described in Kentucky Revised Statute 131.183.

The interest collected off the holdings then head into the state’s General Fund. Trautner said that in Fiscal Year 2015 the state collected approximately $25.6 million in interest.

Revenue receipts for FY 2015 were $11.3 billion.

Rep. Jim Wayne, D-Louisville, told Pure Politics the state would be earning interest the longer the Department of Revenue delayed in sending refunds, but he said he “wouldn’t want to judge” too quickly, because if a breach had occurred Department of Revenue officials would have to ensure accounts are secure.

The updated safety features from the stop-down have identified 22,181 potentially fraudulent returns, according to the Finance Cabinet. Trautner said those returns would be further reviewed by staff to request additional information.

In total there have been 925,160 tax refunds requested to the state, and so far 846,600 refunds have been processed.


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