Just to be clear, this is a major problem:

http://www.irs.gov/uac/Newsroom/IRS-Combats-Identity-Theft-a...

It's called SIRF (Stolen Identity Refund Fraud) and it likely costs billions a year at the federal level (I could not find data on states).

The difference seems to be that Turbo Tax was just the vector because it could be automated. Not a lot of payoff in doing it by hand.

I'd be interested to know how hard it is to trace the destination of fraudulent tax refunds.

It's trivial for the IRS. They either cut a check (and mail it to an address) or direct deposit it in to an account. Most fraudsters opt for the check option... so much so in fact that one of the new fraud prevention mechanism the IRS introduced this year was to cap the total number of refund checks to any specific address at 10(!).