Taxpayer watchdog says IRS had a 500k backlog of identify theft cases
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The Internal Revenue Service has had a backlog of approximately 500,000 unresolved identity theft cases, according to a new report by the National Taxpayer Advocate.
Why it matters: The backlog, which has worsened since last year, has prevented thousands of low-income taxpayers from collecting their federal tax refunds.
What they're saying: The national taxpayer advocate Erin Collins, who identifies problems within the agency and recommends changes, said she believes the IRS has turned a "turned the corner" from the "crisis" she highlighted in 2022.
- "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," she wrote.
- "Although the IRS continues to face challenges as it begins to modernize its technology systems and business processes, I remain optimistic that it is making strides in the right direction."
How it works: When two tax filings are made under one person's name, it suggests that a taxpayer's personal identifying information was stolen. When this occurs, the IRS freezes the return to sort out which filing is legitimate.
- However, as of April 2024, the service was taking over 22 months to resolve identity theft cases, preventing the victim from collecting a return, according to the report.
- In 2023, 69% of taxpayers whose identity theft cases were resolved had incomes at or below 250% of the federal poverty level.
What's inside: Collins noted that IRS employees answered only 31% of the taxpayer calls the agency received during the 2024 filing season.
- Despite not answering most of the calls it received, IRS employees collectively spent 1.1 million hours, or 29% of their time, waiting to receive calls, according to the report.
- This is due to most of the 39.9 million calls being either routed to automated responses or different telephone lines or the taxpayer disconnecting before being placed in a calling queue.
Zoom out: Collins said the $58 billion allocated to the IRS through the Inflation Reduction Act (IRA) accounted for part of her optimism for the agency, particularly the $3.2 billion allocated to taxpayer services and the $4.8 for system modernization.
- However, she said Congress should either allocate additional funding for these areas or allow the IRS shift funding to them.
- Going forward, Collins recommended that the IRS better allocate resources to tackle the identify theft backlog and process filings within normal timeframes.
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