Last year the state stopped $63 million in refunds because of errors or fraud — a sixfold increase over the $10.4 million stopped in 2006, state officials said.
In all since 2011, the efforts have blocked $255.5 million incorrect refunds by tax filers or outright fraud by identity thieves seeking to claim income tax refunds that don't belong to them.
State officials are unable to say what factors their Colorado private contractor, FAST Enterprises, uses to flag tax returns as suspicious, a determination that then leads to refund delays for those taxpayers while they verify their identity with state officials.
It's upset LaRon Glover, a Milwaukee school teacher who said he's had to jump through hoops to get his state tax refunds for three straight years. This year the delay was smaller — three weeks — but last year he didn't get his refund until June, he said.
"I needed my money and I was expecting that money," he said in an interview.
State Department of Revenue officials said they believe the process treats all taxpayers fairly. The added burden and delay, they said, is a necessary step that protects both taxpayers and individual filers like Glover from identity thieves.
"We ask tax filers to allow up to twelve weeks processing time this season as we leverage our ID verification tools to ensure their refund is not going to someone who's stolen their personal, confidential information," Revenue Secretary Rick Chandler said in a statement.
State Revenue spokesman Casey Langan said that about 2% to 3% of the state's 3 million tax returns would see a delay on their refund this spring because of identity checks. That works out to between roughly 60,000 and 90,000 tax filers — a group similar in size to the population of Appleton.
These selected taxpayers, such as Glover, receive a letter from the state that lays out steps to confirm their identity to the Department of Revenue, such as having the taxpayer provide an identification number, answer a quiz about their personal information or provide documents.
"Using technology to help guard against fraudsters who steal identities and file false tax refunds is part of the new normal," Langan said.
The state, Langan said, relies on FAST Enterprises' analytical software to identify tax returns in which "various factors indicate the possibility of identity fraud." Langan couldn't immediately say what those factors are.
But the state's system concerns Glover, a special education teacher who is working on his doctorate degree and who has concerns that process might be somehow disproportionately flagging minorities like him.
Glover said he had talked with his neighbors on the north side as well as co-workers from the suburbs and had drawn the impression that returns from the two areas may be getting handled differently. His accountant has drawn a similar conclusion, he said.
"I said, 'Oh, uh-uh, we got to do something about this,'" he said.
Langan said that the state doesn't know how FAST Enterprises, the contractor, flags suspicious tax returns because the "information is proprietary." The state gives the company information about known cases of fraud along with other data about tax filings and then gets back other returns with potential fraud.
In the state's twice-yearly meetings with FAST Enterprises, there's been no "discussions of age, race or ethnicity" as factors in the vendor's model, he said. FAST Enterprises works with a number of other states, including Minnesota, Michigan and Illinois.
"We analyze results from the vendor on a daily basis during the tax filing season and have seen no results that lead us to believe there is discrimination of this sort," Langan said.
Langan said his agency would be happy to look into Glover's case to try to determine why his returns have been repeatedly flagged.
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