Taxpayers who are victims of identity theft are facing long delays in getting their federal income tax refunds. Some are waiting nearly two years. This delay is making it hard for many people to pay for important things like rent, groceries, and car repairs.
Growing Problem
The IRS is having a hard time resolving identity theft cases quickly. For many lower-income families who rely on important tax credits, this delay can be devastating. These families often find themselves stuck financially because someone else used their personal information to file a fraudulent tax return.
IRS Response
When the IRS receives multiple tax returns for one person, it rejects the real return and freezes it to investigate. This process is necessary to find the real taxpayer but causes long delays. The IRS’s recent report shows these delays are getting worse, now taking more than 22 months on average to solve these cases.
Impact on Families
These delays mainly affect low-income families. Many of these taxpayers depend on refunds from credits like the Earned Income Tax Credit (EITC), which can be up to $7,000. Without timely refunds, these families struggle to pay for basic living expenses. As of April, about 500,000 identity theft cases were still pending at the IRS.
Criticism and Calls for Action
Erin Collins, the National Taxpayer Advocate, has criticized these delays, saying they are unacceptable. She stressed that the IRS needs to prioritize resolving these cases. Collins pointed out that many affected taxpayers have incomes at or below 250% of the federal poverty level, making quick refunds crucial for their financial stability.
IRS Initiatives
The IRS knows about the backlog and is working to improve its processes. They are increasing training and allocating more resources to handle identity theft cases. The agency is also working with other groups to prevent identity theft. Thanks to funding from the Inflation Reduction Act, the IRS has tripled the number of identity theft cases it closes since 2020.
Phone Service Improvements
The IRS has also improved its phone service, with employees answering more calls than before. However, many taxpayers still face long wait times, especially for issues related to identity theft and tax refund delays.
Employee Retention Credit
Another issue is the Employee Retention Credit (ERC). The IRS paused processing ERC claims due to widespread fraud. Now, the agency is processing lower-risk claims but legitimate businesses are still experiencing delays. The IRS aims to deny billions of dollars in improper claims while ensuring eligible taxpayers get their payments.
Despite these efforts, the IRS continues to face criticism for its slow response times and the complexity of its processes. The agency is trying to balance the need for thorough reviews with the necessity of timely payments to taxpayers.
The ongoing delays in tax refund processing due to identity theft are a big problem affecting many taxpayers. While the IRS is taking steps to fix the issue, much work remains to be done to ensure timely and efficient service.
FAQs
1. Why are tax refund delays happening?
Tax refund delays are happening because the IRS has to investigate cases of identity theft, which takes a long time.
2. How long does it take to resolve an identity theft case?
It takes more than 22 months on average to resolve an identity theft case.
3. Who is most affected by these delays?
Low-income families are most affected because they rely on tax credits to cover basic living expenses.
4. What is the IRS doing to fix this problem?
The IRS is increasing training, allocating more resources, and working with other groups to prevent identity theft.
5. How can I stay informed about my tax refund status?
You can stay informed by checking updates from the IRS and contacting their phone service for information about your case.