The IRS is currently facing a significant challenge with a growing pileup of tax identity theft cases, which has reached approximately 500,000 unresolved cases as of April. This number has increased from 484,000 cases reported in September, indicating a worsening situation in terms of resolving these issues.
Identity theft victims are experiencing extensive delays in receiving resolutions and refunds, with an average wait time of more than 22 months. These delays have been further exacerbated over the past few months, with victims previously waiting 19 months for resolution and refunds as reported in January. The impact of Covid-19 shutdowns and pandemic relief efforts has contributed to these prolonged wait times, causing significant hardship for taxpayers, particularly those with lower incomes.
The delays in resolving tax identity theft cases have had a particularly severe impact on taxpayers, especially for those with adjusted gross incomes at or below 250% of the federal poverty level. Nearly 70% of the cases involve individuals in this income bracket, further highlighting the disproportionate burden placed on lower earners. Despite improvements in taxpayer service during the 2024 season, the backlog of identity theft cases remains a pressing issue that continues to affect a large number of individuals.
The IRS has acknowledged the severity of the situation and is working on a range of improvements to expedite service for identity theft victims. These efforts include allocating more resources to work on cases, reviewing existing processes, and engaging with stakeholders to identify and prevent evolving tax-related identity theft threats. While the complexity of these cases requires time for resolution, increased funding has better positioned the agency to handle them more efficiently.
In light of the ongoing challenges posed by tax identity theft, the IRS has issued a warning to tax professionals to safeguard themselves against potential identity theft criminals who may target them and their clients. This precautionary measure is crucial in protecting sensitive personal information and preventing further cases of tax-related identity theft.