DENVER (AP) – Concerns about increasing fraud by thieves using filing software and stolen identification information here and in at least one other state mean the Colorado Department of Revenue will this year issue some refunds by slower-but-surer check to taxpayers who had wanted electronic payments, the department’s top tax official said Monday.

An increase in fraudulently filed returns in recent weeks is “more significant than it has ever been before,” John Vecchiarelli, head of the department’s tax division, said in an interview.

Fraudsters were attempting to steal refunds sent to bank accounts or to replenish pre-paid debit cards, with the latter a particular concern, Vecchiarelli said. Taxpayers who get checks will also receive a letter directing them to contact a fraud hotline if they have not filed a return or are not expecting a refund.

Vecchiarelli urged them to do so. “Help us try to root out this abusive and fraudulent behavior,” he said.

The department said its own systems have not been compromised, and fraudsters are getting identity information from other sources. It cited recent reports about information-technology attacks on private companies.

Among recent breaches, the giant Blue Cross Blue Shield insurer Anthem reported being targeted by IT attackers in late January, saying hackers gained access to potentially millions of names, birthdates, email addresses, employment details, Social Security numbers, incomes and street addresses of people who are currently covered or were customers as far back as 2004.

An official in another state that works with Colorado in a consortium formed to fight fraud first alerted him to the problem involving do-it-yourself tax preparation software, Vecchiarelli said. He did not name the other states in the consortium, saying he was not sure he was authorized to do so.

After that alert, Colorado tax call centers began getting queries from users of such software about notices that their returns had been filed, though they had not filed them.

Colorado’s revenue department said it was reviewing all methods of filing, including by paper, and not singling out such methods as TurboTax, the country’s most popular do-it-yourself tax preparation software. TurboTax recently temporarily halted the processing of state tax returns because of an increase in fraudulent filings. Last month, tax officials in Connecticut said they were stepping up safeguards after the problems reported by Anthem and TurboTax.

“Refund fraud is not new, but has become bigger as electronic filing and direct deposits have become available to the general public,” Vecchiarelli said.

Colorado began offering direct-deposit refunds a decade ago, he said. In the last five years, officials have seen an increase in requests for such deposits to go to pre-paid debit cards, which can be purchased without the identity hurdles banks would put up.

In a step it said was an attempt to combat fraud, the Internal Revenue Service this year started limiting the number of refunds electronically deposited into a single financial account or pre-paid debit card to three.

“Internally we’re having serious discussions about how do we best combat this,” Vecchiarelli said. “We will look at what the Internal Revenue Service did.”

He would not say how many checks were being sent instead of direct deposits this year. Most taxpayers who requested direct deposit of their returns will still be paid electronically, the department said. About half the 2.5 million tax forms received last year resulted in refunds, and 75 percent of taxpayers owed refunds had requested direct-deposit payments, the department said.

The department described sending checks to taxpayers who had requested direct deposit as a major undertaking. Vecchiarelli said he had the infrastructure to do so, but it would be more costly.

– By Donna Bryson, AP Writer

(© Copyright 2015 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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