WASHINGTON (AP) — The IRS has boosted taxpayer services through the Democrats’ Inflation Reduction Act, but is still struggling to process claims from a coronavirus pandemic-era tax credit program and has been slow to resolve some cases of identity theft, according to an independent watchdog report released Wednesday.
“For the first time since becoming a National Taxpayer Advocate in 2020, I can start this report with good news: the taxpayer experience has noticeably improved,” Erin M. Collins wrote in her 2024 annual report to Congress.
She said that “the IRS has made great progress” with the help of the billions of dollars in multi-year funding, although she noted that “IRS service remains far from perfect.”
Remaining service gaps include lengthy delays in resolving claims from the nearly half a million taxpayers whose identities were stolen by fraudsters who received refunds on their behalf. According to the report, delays increased from 19 months in 2023 to 22 months in 2024.
In addition, the report says there have been lengthy delays in processing eligible claims for employee retention credits filed by employers who rely on these refunds to stay in business.
The Employee Retention Credit, or ERC, was intended to help companies retain workers during shutdowns during the pandemic, but quickly became a magnet for fraud. The complex eligibility rules allowed scammers to target small businesses and offer application assistance for a fee – even if they didn’t qualify.
In September 2023, the IRS announced a pause on accepting claims for the tax credit until 2024 due to growing concerns that an influx of applications were fraudulent.
“Although the IRS has processed several hundred thousand claims in recent months, it still had a backlog of approximately 1.2 million claims as of October 26, 2024,” Collins said in her Wednesday report. “Many claims have been pending for some time. a year.”
IRS Commissioner Daniel Werfel said that “things are moving in a very positive direction when it comes to our performance in providing taxpayer services,” but still, “I view the problem of identity theft as our largest current gap in the service.” He said the agency is seeing higher numbers of theft victims overall since before the pandemic, in part because scammers are increasingly moving to online schemes.
Werfel said the agency is adding more resources to the problem and streamlining identity theft cases by differentiating between complex and simpler cases to more quickly resolve taxpayer issues.
Among other recommendations, taxpayers are calling on Congress to expand the jurisdiction of the U.S. Tax Court to hear refund cases, give the Low Income Taxpayer Clinic program more financial leeway to help taxpayers, and require the IRS to resolve claims for refund or credits processed in a timely manner. manner.
