[codersteve]

>>State tax return fraud has been largely non-existent... so non-existent in fact that USA Today reported the state of Minnesota got suspicious when there were 2 reported cases of fraud

I doubt it. Most states are poor at fraud detection, they are likely losing a lot but just don't know it.

[dragonwriter]

I actually don't doubt that State tax return fraud is much less prominent than Federal tax return fraud, for one key reason: there's less money at stake, because of lower state income tax rates (more importantly, lower per-taxpayer state withholdings -- which are in part due to lower rates, but I also get the impression that at least some states use withholding formulas that are more likely to underwithhold than the federal withholding formula, resulting in both lower refunds and less money that can be stolen by tax return fraud, even compared to the nominal tax rate.)

Its more profitable to do fraud where the money is.