MONTGOMERY, Alabama — The state of Alabama slowed about 100,000 tax refunds this year because of a new computer algorithm designed to detect fraud and identity theft.
That meant some tax refunds have gone longer than normal in getting returned to Alabama taxpayers, and will be paid with 3 percent interest, as required by law.
“If ID theft was not such a problem, we wouldn’t have to do this,” said Julie Magee, state revenue commissioner. “The criminals have just gotten greedier.”
Magee said she would rather pay interest to taxpayers for delayed refunds than make payments to ID thieves, who can be people who live in other nations. She said in the past, ID thieves would target federal income-tax refunds, but they have expanded operations to state refunds.
The ID thieves are old foes in the credit-card industry, but they have stepped up their efforts to steal state refunds across the nation.
Magee said that the Alabama Department of Revenue, in response to fraud, installed a new computer program to watch for fraud clues. It slowed down as many as 100,000 personal income-tax tax refunds this year, Magee said, using a variety of “filters.”
“We probably put too many (filters) in place this year, to be honest,” said Magee. Magee apologized to the taxpayers but stressed again that the state is trying to safeguard their refunds.
A complicating factor for the state was the fact that the federal government began processing its federal returns three weeks later than normal, beginning some time in February. That slowed down Alabama’s system too, Magee said.
As of Wednesday, the state still owes $19,867,000 in refunds. Magee said 13,716 individual returns are left to process. That’s far fewer than 1 percent of all returns filed this year.
In total so far, according to the Alabama Department of Revenue website, 1.85 million returns have been processed, and 1,063,768 refunds have been issued.
Magee said next year’s program will more narrowly focus on questionable returns, and raise fewer red flags, while still rooting out fraudulent returns.
Federal refund status can be checked here.
This story will be updated.