According to a recent report from the National Taxpayer Advocate, an independent watchdog within the IRS, the tax agency is far too slow in resolving a significant issue for taxpayers, who have to wait nearly two years for the tax agency to resolve identity theft cases.
According to the report, the IRS took more than 22 months in April 2024 compared to 19 months earlier in the year to handle assistance cases for victims of identity theft.
The NTA further stated that as of April, the IRS had around 500,000 open identity theft cases.
These happen when tax return fraudsters use a taxpayer’s Social Security number to file a fraudulent tax return. This is usually found when the taxpayer files their own tax return. To determine which taxpayer is the real one in these situations, the IRS freezes the second return.
Identity theft cases are being delayed by almost two years, despite the IRS receiving billions of dollars in funds from the Inflation Reduction Act, which was signed into law by President Joe Biden in August 2022.
The IRS has received billions in money from the Inflation Reduction Act, which President Joe Biden signed into law in August 2022, to combat identity theft cases.
“IRS delays in resolving identity theft victim assistance cases are unconscionable,” Collins stated.
Additionally, since victims of identity theft frequently struggle with other linked concerns, they may suffer further harm. Delays in tax refunds, for example, can lead to financial instability, particularly since two-thirds of victims of identity theft are low-income and depend on their refunds to cover their essential living costs.
As per the report, “These delays are particularly challenging for low-income taxpayers who may rely on these refunds to pay their day-to-day living expenses or expenses accrued throughout the year, such as medical bills. In addition, these identity theft victims may struggle to secure certain kinds of loans, such as mortgages.
Tax filing season in 2024
Among other things, the report describes how well the federal tax collector has performed in updating its technology and how quickly it answers calls and distributes refund checks.
In comparison to the “abysmal” service taxpayers received during the pandemic, the NTA stated that overall, the 2024 filing season went much more smoothly than previous years.
“Not to be overly dramatic, but during the last four years, I believe we have progressed from a place of despair to a place of hope and optimism for the future of the agency and therefore for taxpayers,” Collins stated.
Under the Inflation Reduction Act, the IRS was initially given an infusion of $80 billion; however, this funding is subject to future reductions.
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Republicans and the White House reached an agreement last year about the debt ceiling and budget cuts, which led to the agency rescinding $1.4 billion and agreeing to remove $20 billion from the IRS over the following two years and utilize it for other nondefense programs.
Since 2013, when it was discovered that the IRS had carefully examined political organizations seeking tax-exempt status, more funding for the IRS has been a contentious political issue.
This was during the Obama administration. According to an internal watchdog report from the Treasury Department, both liberal and conservative groups were selected for in-depth examination.
“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 stated. “I am bullish that the taxpayer experience will continue to improve and move onward and upward.”
