IRS has taken nearly 2 years to help tax identity theft victims get their refunds

Personal Finance

Erin Collins, national taxpayer advocate at the Taxpayer Advocate Service, speaks at a Senate Appropriations subcommittee hearing in Washington, D.C., on May 19, 2021.
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There’s a pileup of tax identity theft cases at the IRS — but the agency is working on a “range of improvements” to speed up service.

As of April, the agency had roughly 500,000 unresolved identity theft cases, up from 484,000 cases in September, National Taxpayer Advocate Erin Collins reported last week. Identity theft victims have waited more than 22 months for resolution, plus several weeks for refunds.

Tax identity theft happens when criminals use stolen personal information to file a fraudulent tax return to claim a refund. If a criminal files before the taxpayer, the IRS rejects and freezes the second return for investigation.

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The wait has only grown longer over the past several months. Collins reported in January that identity theft victims were waiting 19 months for resolution and refunds, which stemmed from Covid-19 shutdowns and pandemic relief.

Those delays have caused “significant hardship” for taxpayers, especially lower earners, she wrote.

Nearly 70% of the cases involved taxpayers with an adjusted gross income at or below 250% of the federal poverty level.

“It has been four years from the onset of the pandemic, and the IRS’ delays in helping victims are unconscionable,” Collins wrote last week.

While taxpayer service has improved through the 2024 season, the backlog of identity theft cases remains “one of the most significant ongoing service gaps,” the IRS said in a statement.

IRS plans for ‘faster service’

The IRS said it’s working on improvements to provide “faster service” to identity theft victims, including more resources to work cases.

The agency also plans to review its processes and engage with stakeholders to “identify and prevent evolving tax-related identity theft threats.”

“Identity theft cases are complex and take time to resolve,” but increased funding has better positioned the agency to tackle these cases more quickly, the IRS said.

The agency on Tuesday warned tax professionals to protect themselves from identity theft criminals who could be targeting them and their clients.

“Security threats against tax professionals and their sensitive taxpayer information continue to evolve, and it’s critical to stay on top of the latest developments to protect their business and their clients,” IRS Commissioner Danny Werfel said in a statement on Tuesday. 

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