Thousands of unfortunate taxpayers who are the victims of identity theft are waiting up to nearly two years to receive their federal income tax refunds, according to a report released Wednesday by the National Taxpayer Advocate.
Unfortunately, the situation appears to be getting worse, not better, at the IRS when it comes to clearing up ID theft cases and sending refund cash to those who need it. The rent or mortgage must get paid, groceries need to be bought, the car must get fixed, and the charges on high-rate credit cards all keep piling up.
But the tax refund is nowhere to be found for many victims of tax-related ID theft.
Many taxpayers, particularly lower income families who qualify for key tax breaks designed to help workers with low to modest incomes, suffer during an endlessly long wait for their tax refund cash if their personal information ended up being used by crooks and con artists to file a phony tax return.
What the IRS does when it receives 2 returns for 1 taxpayer
The Internal Revenue Service will reject a taxpayer’s return when the federal agency has already received a fraudulent return using the real person’s Social Security number and other personal identification. The IRS needs to take time to analyze who is really owed the money, which is logical.
The IRS freezes the second return so the IRS “can sort out which taxpayer is the legitimate one,” according to the National Taxpayer Advocate’s midyear report to Congress, which was released Wednesday.
Delays hurt legitimate taxpayers
What’s mind-boggling is how long it takes to get eligible taxpayers their tax refunds. The system takes way too long for families sitting on the sidelines. They’re not getting their tax refund within 21 days after filing the return, like most people. Instead, they’re waiting more than 22 months. Yes, nearly two years. Step back a bit and put yourself in their shoes.
The IRS had been taking about 19 months to identify the legitimate taxpayers and issue their refunds last year, according to the National Taxpayer Advocate’s 2023 annual report to Congress. As of last September, about 484,000 cases were in the backlog.
In January when the 2023 report was released, National Taxpayer Advocate Erin Collins called the delays “unconscionable” and stressed that the IRS needed to place a higher priority on quickly resolving ID-theft related cases for victims.
Notably, the advocate stated, some 69% of taxpayers whose cases the IRS had resolved had adjusted gross incomes at or below 250% of the federal poverty level. Many of those taxpayers qualify for refundable tax credits, such as the earned income tax credit, and need their refunds to promptly pay their living expenses.
For many of these families, there’s not much margin for error in a household budget.
Low-income taxpayers, according to the advocate’s annual report, might have qualified for earned income tax credit benefits that approached $7,000 for tax year 2022.
As of April, though, the IRS now was taking more than 22 months to resolve such cases, according to the latest midyear report. As of April, the IRS had about 500,000 such unresolved cases in its inventory.
“Delays of nearly two years make a mockery of the right to quality service in the Taxpayer Bill of Rights,” Collins wrote in her midyear report. “The IRS must prioritize assistance for these victims and fix this problem quickly.”
The advocate’s report noted that the IRS delays are lengthy and a “blemish on its performance.”
In a statement issued Wednesday afternoon, the IRS said it “recognizes that the backlog of identity theft cases remains one of the most significant ongoing service gaps.”
The IRS said it is working to improve its process, including more training and moving additional resources to work such cases. The IRS plans to engage with “stakeholders within and outside the IRS to identify and prevent evolving tax-related identity theft threats.”
“Identity theft cases are complex and take time to resolve,” according to the IRS statement, “but with increased funding made available by the Inflation Reduction Act, the IRS is now in a better position to resolve cases in a timelier manner. Since 2020, the IRS has tripled its closure rate of identity theft cases.”
The IRS also noted that the agency continues to remain focused on “preventing tax-related identity theft before it occurs,” including an ongoing effort that brings together the IRS, individual states, and the nation’s tax industry to combat fraud. Such preventive actions, according to the IRS, “have strengthened our systems and protected millions of taxpayers from potential identity theft since 2015, but there is still more work to do.”
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The National Taxpayer Advocate…
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