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Revenue chief: State combatting tax fraud
About $30 million in fake returns blocked last year
W Riley at Kiwanis 2
Georgia Revenue Commissioner Lynne Riley, right, and Rep. Jan Tankersley talk to Statesboro Kiwanis Club members and guests after the meeting. - photo by AL HACKLE/Staff

Fighting the problem of fraudulent state income tax returns, the Georgia Department of Revenue blocked almost $30 million worth last year, state Revenue Commissioner Lynne Riley said Thursday in Statesboro. She encourages taxpayers to help by keeping track of their refund status.

Riley, previously head of an accounting firm and a member of the state House of Representatives, was appointed by Gov. Nathan Deal in January 2015 to head the Department of Revenue.  She spoke during lunch to the Statesboro Kiwanis Club after addressing the Downtown Rotary Club of Statesboro over breakfast.

“One of the most difficult things we’re encountering right now is the criminals’ desire to get into your wallets,” Riley told Kiwanians. “Y’all are hearing the stories about identity theft. We are really struggling as we process income tax returns this year to identify that it’s you that is filing that tax return with us.”

States across the nation and the federal Internal Revenue Service face the same problem in many variations, she said.

“We’re also really struggling because we’re seeing that employers are having their systems compromised,” Riley said. “The criminals are stealing valid employment information from employers, using that to file tax returns with state and federal departments and getting your refund before you do.”

Anyone who files a return with the Georgia Department of Revenue can sign up to be notified  electronically when the return is received. Currently, the department is promoting participation in this service at every opportunity, she  said.

“Then we want to take it one step further for this next tax filing season,” Riley said. “We want to be able to interact with  you electronically all along the processing timeline so that not only will we notify you electronically when we receive your return, but we can notify you that there is additional information that we might need, or … a refund has been prepapared and is ready for release.”


Consistent problem

Interviewed after the meeting, Riley said the fraudulent return problem has not grown much in the past couple of years but has been “pretty consistent.”

“So far this year, and we’re not complete with our processing for 2016, we’ve already blocked $17 million in what would have been guaranteed as fraudulent returns filed,” she said.

But she  knows this number is likely to grow during the year, because the department also holds refunds on suspect returns. Filers who never follow up to see where their money went were “probably criminals,” Riley said.

Georgia returns that were blocked and never followed up last year totalled about $30 million in sought refunds, she  said.

Although significant, that would be somewhat less than 1/500th of the state’s direct revenue, which is more than $20 billion annually. The fiscal year 2017 state budget totals a little over $43 billion, and more than  half of that is state revenue, which comes through Riley’s department. Most of the remainder comes from federal programs.

The Revenue Department uses software that detects patterns to flag suspicious returns.

“Unfortunately, the criminals are getting more and more sophisticated, and technology is making it easy for them to use algorithms and different formulas to try to beat our technology, so we spend all of our time trying to stay one step ahead,” Riley said.

She  told club members about one crimefighting tool that has a sophisticated nose instead of software. Sid, the department’s Labrador retriever trained to sniff out paper money, is deployed at the Atlanta airport and has earned the nickname “Sid Seizure,” Riley said.

“In just about every experience where Sid has identified large amounts  of currency being transported through the airport, it’s generally unreported income, and it’s generally something of a criminal nature,” Riley said.


State data breach

Someone in the Kiwanis audience asked how last summer’s data breach at the Georgia Secretary of State’s Office has affected the Revenue Department.

“Not at all,” Riley said.

But she acknowledged that the data files were intended to go to the Department of Revenue by a secure path.

Instead, someone  acting for  Secretary of State Brian Kemp’s agency put the files, including Social Security numbers, driver’s license numbers and birth dates for about 6 million voters, on compact discs. These were then sent to people seeking more general, publicly available voter information.

The Revenue Department uses some of the specific information to verify addresses in returns, Riley said.

“We hope that that will never happen again,” she said. “We have not seen any evidence of that data being used for any type of criminal activity or fraudulent filing. So we’re very grateful that was a contained incident.”

Kemp fired one employee. His  agency recovered 12 discs said to be the only ones sent out, and destroyed them. Through this year, Kemp’s office  is offering free credit monitoring and stolen-identity restoration services to Georgians who were registered voters at the time of the breach.

Rep. Jan Tankersley, R-Brooklet, introduced Riley at the Kiwanis Club. They shared an apartment in Atlanta when Riley served in the Legislature, where she was one of the governor’s floor leaders. They are still roommates when the Legislature is in session.

Herald reporter Al Hackle may be reached at (912) 489-9458.



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