The state of Georgia has begun a pilot program to stop tax fraud with the help of identity verification and authentication tools from LexisNexis.

Launched in January as part of the state’s anti-fraud program, the pilot program found that 2 percent of all tax returns filed were potentially fraudulent.

The Georgia pilot program comes at a time when the Internal Revenue Service has stepped up its efforts to catch identity thieves and come under pressure in Congress to do more (see IRS and Social Security Urged to Curb Tax Fraud and Identity Theft). Last week, at a congressional hearing, Treasury Inspector General for Tax Administration J. Russell George said that if the problem is not addressed, the IRS could issue approximately $26 billion in fraudulent tax refunds resulting from identity theft over the next five years.

IRS deputy commissioner Steven T. Miller said that last year, the IRS protected $1.4 billion in refunds from being erroneously sent to identity thieves. However, with the problem continuing to grow, the IRS installed identity theft filters in its system, which delayed nearly 8 million tax refunds from going out to taxpayers (see 7.8 Million Tax Refunds Delayed This Year at IRS).

Several companies in the private sector have stepped forward to provide assistance. Last week, LifeLock CEO Todd Davis told Accounting Today that his company offers identity theft protection technology that could work with the IRS’s systems (see LifeLock CEO Offers Identity Theft Service to IRS).

LexisNexis Risk Solutions said Monday that the state of Georgia has leveraged its LexisNexis Tax Refund Investigative Solution in a pilot program for the purpose of mitigating identity fraud, and it has awarded the company a contract to continue the effort. The pilot program was launched in January and uses identity verification and authentication tools to detect and prevent potentially fraudulent tax returns. The pilot program detected that 2 percent of all returns filed were potentially fraudulent and is part of the state’s comprehensive anti-fraud program, which stopped millions of dollars in fraudulent returns in 2011.

“Tax refund fraud is a growing problem nationwide, and increasingly it is perpetrated by criminals who steal the identities of innocent taxpayers and then submit returns requesting refunds before the real taxpayer has a chance to do so,” said Georgia Department of Revenue Commissioner Doug MacGinnitie in a statement. “We launched our anti-fraud program to stop tax refund fraud in Georgia. By leveraging best practices and enhancing our existing system with an identity-based approach to finding fraud, we are protecting both the taxpayers and the state of Georgia.”

Georgia’s pilot program of the LexisNexis Tax Refund Investigative Solution used identity-based filters, which screened tax refund requests against billions of LexisNexis identity records collected from public databases and commercial sources. When a returned record is flagged with a fraud indicator, the individual is asked to answer a series of identity authentication questions which only an individual with authentic, personal knowledge can answer. The authentication questions were securely integrated into the Georgia Department of Revenue website and customer service center.

For more information, visit http://www.lexisnexis.com/government/solutions/revenue/tax-refund-investigative.aspx.