The issue of identity theft affecting taxpayers and delaying their federal income tax refunds has reached critical levels, according to recent reports from the National Taxpayer Advocate. Thousands of individuals, particularly those from lower income families relying on tax refunds for essential expenses like rent, groceries, and car repairs, are experiencing excruciating delays.
The root of the problem lies in the complexity of resolving cases where fraudulent tax returns have been filed using victims’ Social Security numbers and personal information. When the IRS detects such fraud, it freezes the legitimate taxpayer’s return to investigate and determine the rightful recipient of the refund. However, this investigative process is lengthy, often stretching beyond 22 months for resolution.
Erin Collins, the National Taxpayer Advocate, has been vocal about the unacceptable delays, describing them as “unconscionable” and emphasizing the urgent need for the IRS to prioritize resolving identity theft cases more swiftly. She highlighted that a significant portion of affected taxpayers—about 69%—have incomes at or below 250% of the federal poverty level, making them eligible for crucial refundable tax credits such as the earned income tax credit.
The situation has worsened despite efforts by the IRS to improve its handling of identity theft cases. The agency has faced criticism not only for the prolonged delays but also for discrepancies in its customer service metrics. While the IRS reports improvements in its telephone service, Collins and others argue that the benchmarks used to measure this service often mislead the public about actual call-handling efficiency.
Moreover, amidst ongoing challenges, such as the processing of employee retention credit claims and combating fraudulent activities during the COVID-19 pandemic, the IRS is navigating a delicate balance between preventing improper payouts and ensuring timely assistance to legitimate taxpayers.
Collins and her office continue to advocate for systemic reforms within the IRS to enhance efficiency, transparency, and accountability. Their efforts aim to alleviate the financial burdens faced by taxpayers caught in the bureaucratic quagmire of identity theft-related delays, urging the IRS to streamline processes and deliver on its commitment to taxpayer rights and service quality.
In conclusion, while the IRS acknowledges the severity of the issue and has taken steps to address it, substantial improvements are needed to fulfill its obligations promptly and effectively, particularly to those most vulnerable in our society.