The NTA, an independent watchdog within the IRS, has raised concerns about the agency's handling of these cases, which have been on the rise.
As reported by CBS News, the IRS took over 22 months to resolve identity theft assistance cases in April 2024, a significant increase from the 19 months recorded earlier in the year. The NTA report revealed that the IRS had approximately half a million unresolved identity theft cases as of April.
These cases arise when fraudsters file a tax return using a legitimate taxpayer's Social Security number, intending to claim their tax refund. The IRS typically identifies these cases when the actual taxpayer files their return, leading to the freezing of the second return until the legitimate taxpayer is identified.
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Despite the IRS receiving billions in funding from the Inflation Reduction Act, signed into law by President Joe Biden in August 2022, the nearly two-year wait to resolve identity theft cases persists. Erin M. Collins, who heads the organization tasked with protecting taxpayers' rights under the Taxpayer Bill of Rights, expressed her concern over the delays in assisting identity theft victims.
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"IRS delays in resolving identity theft victim assistance cases are unconscionable," Collins stated.
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The report also highlighted the potential harm that could befall identity theft victims, who often grapple with related issues. Delays in tax refunds can exacerbate financial insecurity, especially for low-income victims who depend on their refunds for basic living expenses.
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The IRS, in an email response to CBS MoneyWatch, acknowledged the backlog of identity theft cases as one of its most significant ongoing service gaps. The agency appreciated the NTA's attention to the issue and emphasized its commitment to improving its service to victims of identity theft.
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The IRS stated, "It's 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 moving additional resources to work these important cases."
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The agency also noted that it has tripled its closure rate of identity theft cases since 2020, and the increased funding from the Inflation Reduction Act will enhance its ability to resolve these issues.
However, the IRS's funding remains a contentious issue. The agency received an $80 billion infusion under the Inflation Reduction Act, but this funding is susceptible to potential cutbacks. A deal between Republicans and the White House on last year's debt ceiling and budget cuts resulted in a $1.4 billion reduction from the agency and an agreement to divert $20 billion from the IRS to other nondefense programs over the next two years.
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Despite these challenges, Collins remains optimistic about the future of the IRS and the taxpayer experience, particularly with the additional multiyear funding provided by the Inflation Reduction Act for Taxpayer Services and information technology modernization.
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"I believe the IRS has turned the corner, and with the additional multiyear funding provided by the Inflation Reduction Act, particularly for Taxpayer Services and information technology modernization," Collins said. "I am bullish that the taxpayer experience will continue to improve and move onward and upward."
The NTA's report serves as a critical examination of the IRS's performance in modernizing its technologies, its response rate to phone inquiries, and the speed at which it issues refund checks, among other metrics. Despite the challenges, the 2024 filing season was smoother than recent years, especially compared to the service taxpayers experienced during the pandemic.
