The IRS is far too slow to solve a major problem for taxpayers, who have to wait nearly two years for the IRS to clear up identity theft cases, according to a new report from the National Taxpayer Advocate, an independent watchdog that is part of the IRS .
In April 2024, the IRS took more than 22 months to resolve cases for identity theft victims, compared to 19 months earlier this year, the report found.
The IRS had about 500,000 unresolved identity theft cases as of April, the NTA added. These occur when fraudsters file a tax return using a taxpayer’s Social Security number for the purpose claim their tax refund – a problem usually discovered when the actual taxpayer files their own return. In these cases, the IRS freezes the second return so it can determine which taxpayer is the legitimate one.
The nearly two-year wait for identity theft cases to be resolved comes at the same time the IRS is being bolstered by billions in funding from the Inflation Reduction Act that President Joe Biden signed into law. August 2022Overall, this year’s tax season went much more smoothly than in previous years, but Erin M. Collins, who directs the organization designated to protect taxpayers’ rights under the Taxpayer Bill of Rights, called the delays a way to help victims of identity theft.
“IRS delays in resolving identity theft victim assistance cases are unconscionable,” Collins said.
And even more harm can befall victims of identity theft, who often face other related problems. For example, tax refunds can be delayed, adding to financial insecurity, especially since two-thirds of identity theft victims are low-income and rely on their refunds to meet their basic living needs.
“These delays are especially challenging for low-income taxpayers, who may rely on these refunds to pay their daily living expenses or expenses incurred during the year, such as medical bills. Additionally, these victims of identity theft may have difficulty securing their identities. certain types of loans, such as mortgages,” the report said.
In an emailed response to CBS MoneyWatch, the IRS said it “recognizes that the identity theft backlog continues to be one of the most significant ongoing gaps in service delivery,” adding that it appreciates the NTA drawing attention to the issue.
“It is important to note that the IRS is actively working to implement a range of improvements to provide faster service to victims of identity theft, including identifying, training and deploying additional resources to handle these important cases,” the agency said . “Other planned actions include reviewing our processes and identifying new practices that will improve the process.”
The IRS noted that it has tripled the number of closures of identity theft cases since 2020, and that increased funding for the IRA will help improve its ability to resolve these issues.
Tax return season 2024
The report details, among other things, the federal tax collector’s performance in modernizing its technologies, the speed with which it answers its phones and the speed with which it sends refund checks.
Overall, the 2024 tax return season went much smoother than in recent years, especially compared to the “terrible” service taxpayers experienced during the pandemic, the NTA said.
“I don’t want to be too dramatic, but I believe that over the last four years we have moved from a place of despair to a place of hope and optimism for the future of the agency and therefore for the taxpayers,” Collins said.
The IRS originally received an $80 billion injection under the Inflation Reduction Act, but that money is vulnerable to potential cuts.
Last year’s debt ceiling and spending deal between Republicans and the White House resulted in a $1.4 billion withdrawal from the agency and a separate agreement to take $20 billion from the IRS over the next two years and divert that money to other non-defense programs.
Additional money for the IRS has been politically controversial since 2013, during the Obama administration, when the agency began scrutinizing political groups that applied for tax-exempt status. A report from the Treasury Department’s internal watchdog concluded that both conservative and liberal groups were chosen for scrutiny.
“I believe the IRS has turned the corner, and with the additional multi-year funding provided by the Inflation Reduction Act, especially for taxpayer services and information technology modernization,” Collins said. “I am optimistic that the taxpayer experience will continue to improve and evolve.”
—With reporting by the Associated Press.
