IRS must act quickly to help resolve identity theft cases

The Internal Revenue Service has been flush with funds since the Biden Administration enacted an incredible $80 billion in addition to the agency’s $12.3 billion annual budget.

Despite these funds being described as a cure-all for the IRS’s shortcomings, some customer service has actually worsened. One in particular is the resolution of identity theft cases, sometimes leaving identity theft victims in stressful financial limbo for nearly two years. 

With criminals continuously finding creative ways to steal individual’s and businesses’ identities to file tax returns, the IRS is no stranger to identity theft cases. Taking years to identify and resolve victims’ claims and problems is unacceptable, and both the delinquent resolution time and sheer volume of this backlog must be improved rapidly. 

The National Taxpayer Advocate has pointed to lengthy tax-related identification theft resolution delays as among the most serious problems taxpayers face. In its annual report, the Taxpayer Advocate found there are “unconscionable delays” in IRS support for victims of tax-related identity theft. In particular, “Taxpayers who are victims of tax-related identity theft often must wait nearly 19 months for the IRS to process their returns and send their refunds.” The IRS currently has a backlog of almost 600,000 such cases, according to IRS data. 

The human cost can be devastating. Idahoans have faced significant issues with this form of identity theft. Victims sometimes only discover the theft when the IRS rejects their legitimate tax return filing because criminals already fraudulently used the victims’ Social Security numbers to file a return. Once aware, many negative outcomes can occur during the time a taxpayer awaits the IRS resolving its case. This includes the IRS taking actions that could harm already victimized taxpayers, such as delayed (often stolen) refunds, IRS collection actions (including liens and levies), potential impacts on employment, time spent seeking resolution, costs associated with seeking resolution, drain on IRS and court resources, and more.

Further, someone who receives an IRS lien or levy inappropriately because of an unresolved ID theft case has a limited window of due process in which to act, or the person forfeits that right and the IRS can (and will) start acting on the collection action. The whole process costs time and money. Once the collections process begins, the victim has new problems of trying to get the lien removed, and liens impact credit, interest rates, and potentially employment. The “victim impact” can be huge, with IRS delays materially exacerbating the situation.

As the Taxpayer Advocate notes: “Victims of identity theft may feel overwhelmed, helpless, angry, isolated, betrayed, and even embarrassed. This crime may trigger fears regarding financial security and the ability to trust again. The IRS should do everything possible to timely assist these victims and provide them with the peace of mind that the IRS is looking out for their best interests and protecting their rights.”

I agree. I am pressing IRS Commissioner Danny Werfel for answers and progress. I asked the IRS to report on concrete steps the IRS will take to quickly and thoroughly resolve unresolved identity theft cases and the reasons why there are so many of these cases. Additionally, IRS's Identity Protection PIN (IP PIN) program is something you can proactively do to reduce the risk of your tax returns being fraudulently filed. In the meantime, I continue to stress that the IRS does not need billions more to fix these problems. It needs to use the funds it has been allocated wisely on improved customer service and responsiveness that includes addressing these alarming identity theft issues — not on wasteful, redundant programs and heavy-handed enforcement. 

Mike Crapo represents Idaho’s First Congressional District in the U.S. Senate. He can be reached at crapo.senate.gov.