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Identity Theft Victims Are Waiting Months for Their Tax Refunds, TIGTA Says

Apr 13th 2015
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Victims of identity theft are continuing to experience long delays and errors in receiving their tax refunds, according to a report released on April 9 by the Treasury Inspector General for Tax Administration (TIGTA).

During fiscal year 2013, the IRS took on average 278 days to resolve the tax accounts of identity theft victims due a refund, an improvement over the average of 312 days the tax agency took to resolve victims’ tax accounts in fiscal year 2012.

Despite the improvement, the time it took the IRS to resolve identity theft cases in 2013 is much longer than what the agency tells victims. According to the report, the IRS informs taxpayers who inquire about the status of their identity theft case that cases are resolved within 180 days.

“Refund fraud adversely affects the ability of innocent taxpayers to file their tax returns and timely receive their tax refunds, often imposing significant financial hardship,” Treasury Inspector General J. Russell George said in a written statement. “While the IRS is making some progress in assisting victims of identity theft, those who have been affected by this devastating crime deserve better.”

Identity theft was ranked No. 3 in the IRS’s “Dirty Dozen” tax scams for 2015. Tax-related identity theft occurs when someone uses a stolen Social Security number to file a tax return claiming a fraudulent refund. Although the IRS has recently made significant strides – over a three-year period ending in 2014, it halted 19 million suspicious returns and protected more than $63 billion in fraudulent refunds – identity theft remains a prime concern.

According to the report, TIGTA found that the IRS continues to make errors when resolving the tax accounts of identity theft victims. Based on the results of a sample of 100 identity theft accounts resolved in 2013, TIGTA estimates that of the 267,692 taxpayers whose accounts were resolved, 25,565 (10 percent) may have been resolved incorrectly, resulting in the delay of refunds or the victim receiving an incorrect refund amount.

TIGTA made five recommendations to the IRS, including that it develop processes and procedures to ensure that case-closing actions and account adjustments are accurate, accurately calculate the average time it takes to fully resolve taxpayer accounts affected by identity theft, and accurately report the number of identity theft cases resolved to include only those taxpayers for whom the IRS fully resolves their account and issues any refunds due.

IRS Response
The IRS agreed with three recommendations and partially agreed with another recommendation. The IRS disagreed with the recommendation to develop processes and procedures to calculate the average time it takes to fully resolve taxpayer accounts.

In a written response to the report, Debra Holland, commissioner of the IRS’s Wage and Investment Division, said the agency has made significant improvements to its identity theft processes, including the use of special processing codes to expedite assignment to victim assistance units and the deployment of designated teams to focus on older identity theft cases.

“The IRS has improved its ability to detect identity theft refund fraud during return processing so that appropriate actions can be taken immediately to prevent the fraudulent return from adversely affecting the victim’s tax account,” she wrote. “When victims are impacted, we have also streamlined post-determination processes to ensure refunds are issued more quickly than in the past.

“We have also taken actions to assist taxpayers in safeguarding their tax accounts from being compromised and prevent future victimization,” Holland continued. “For the 2015 filing season, the IRS has continued the Identity Protection Personal Identification Number (IP PIN) pilot program. An IP PIN is a unique identification number that protects the holder from being victimized by tax-related identity theft refund fraud by preventing the processing of returns filed without, or with an incorrect, IP PIN. The IP PIN pilot allows taxpayers who filed their 2013 federal income tax return with addresses in Florida, Georgia, and the District of Columbia to voluntarily participate in the program by enrolling through Further, the IRS is offering approximately 1.7 million taxpayers the opportunity to opt in to the IP PIN program in instances where the IRS has identified indications of identity theft on their accounts.”

Related article:

Presenting the IRS Dirty Dozen Tax Scams for 2015: Part 1


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