Fraudulent tax returns as a result of identity theft totaled approximately $3.6 billion for the 2011 tax season, NBC News reports. Thanks to better detection, that’s down by $1.6 million from the previous year, but a report for the Treasury inspector general said the ongoing problem creates “devastating consequences for taxpayers.” Three states have contracted with LexisNexis Risk Solutions to screen all returns against a massive database in an effort to find potential fakes at the front end. Any flagged returns are set aside, and taxpayers are sent notices to go online and verify their identities.
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