SCDOR FRAUD DETECTION EFFORTS SAVED TAXPAYERS $65 MILLION DURING FY23

What you need to know:

The SCDOR’s Discovery and Enforcement section stopped 5,765 fraudulent returns from being filed during the past fiscal year, saving taxpayers more than $65 million.
Taxpayers should take steps to protect themselves from identity theft and tax refund fraud.
If you suspect you’ve been the victim of identity theft, submit the I-381, Identity Theft Affidavit to the SCDOR.

With tax season in full swing, the South Carolina Department of Revenue (SCDOR) and the South Carolina Department of Consumer Affairs (SCDCA) want to remind taxpayers to be vigilant against identity theft and tax refund fraud. Knowing what to look for and how to protect yourself can keep your refund out of the hands of criminals.

During Fiscal Year 2023, the SCDOR's Discovery and Enforcement section saved taxpayers more than $65 million by preventing the processing of fraudulent state Individual Income Tax returns. Overall, the Discovery and Enforcement section stopped 5,765 fraudulent returns from being processed.

“There is no greater responsibility for the SCDOR than protecting compliant taxpayers and their personal information," said SCDOR Director Hartley Powell. “Each year, our Discovery and Enforcement section reviews millions of tax returns to spot fraud. Their keen eyes and quick minds saved taxpayers $65 million last year and offer a great example of our commitment to enforcing our state's tax laws."

Analysts within the SCDOR's Discovery and Enforcement unit look for two types of fraudulent returns:

Completely fraudulent returns – This is commonly known as identity theft, where criminals steal the personal information of a taxpayer, then use that info to file a return and attempt to receive a refund.
Legitimate returns that include fraudulent information – These are cases where actual taxpayers file their own returns using bogus information. This includes employers failing to pay Withholding Tax, taxpayers filing bogus W-2 wage statements, and those filing fraudulent expense deductions.

During the fiscal year ending June 30, 2023, the Discovery and Enforcement unit referred five cases for criminal prosecution.

Taxpayers may interact with the Discovery and Enforcement section through the SCDOR's identity verification process. When fraud is suspected, the SCDOR may mail taxpayers an Identity Verification Notice with information to help taxpayers validate their identity. Last year, the SCDOR sent more than 54,000 of these letters to taxpayers. Learn more about the identity verification process.

Most taxpayers who receive an Identity Verification Notice aren't expecting it, but it's an important step in fighting tax fraud and ensuring taxpayers get the correct refund. If you receive one of these notices, be sure to respond promptly so the SCDOR can resolve the issue and send you your refund.

If you suspect you've been the victim of identity theft, submit the I-381, Identity Theft Affidavit to the SCDOR.

The South Carolina Department of Consumer Affairs (SCDCA) has tips for protecting your personal information and identity:

When filing online, use anti-virus software and ensure your computer is connected to a secure internet connection. Use strong and unique passwords and enable multi-factor authentication whenever possible. Do not use public Wi-Fi to file your return.
Don't respond to requests for personal information from phone calls, texts, emails, or social media messages.
Fraudsters often pose as the IRS or SCDOR to scare and trick you into disclosing personal information or sending them money. Remember, the IRS and SCDOR will not call about taxes without sending a notice through the mail first.
Consumers who believe they are the victim of a security breach, scam or identity theft are encouraged to seek guidance from SCDCA's Identity Theft Unit. Call (844) TELL DCA (835-5322) or fill out an ID Theft Intake form by visiting consumer.sc.gov and clicking on Report Identity Theft.
Use trusted, well established tax preparation websites. Don't just choose a site because it is cheap. Many South Carolinians are eligible to file online for free with easy-to-use tax preparation software. Visit dor.sc.gov/iit-filing to view all your filing options.
Use a qualified tax preparer. Taxpayers should make sure their preparer has a Preparer Tax Identification Number (PTIN) from the IRS. You can use the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications to help find a preparer.

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