IRS lengthy case backlog frustrates identity theft victims

• What's at stake: Taxpayers waiting on refunds and the IRS facing massive interest payouts on delayed cases.
• Expert quote: "We agree that cases should move to resolution..." — Kenneth Corbin, IRS
• On the horizon: IRS efforts to use employee skill levels to move cases more efficiently.

Taxpayers waited an average of 20 months for the Internal Revenue Service to process their identity theft cases in recent years, frustrating and burdening taxpayers expecting their tax refunds, according to a new report. The delays also cause the IRS to pay interest on the delayed refunds.
The report, released Thursday by the Treasury Inspector General for Tax Administration, noted that the IRS's The Identity Theft Victim Assistance function is supposed to resolve identity theft claims within 120 days, but cases nearly quadrupled in 2021, creating a backlog that persisted into 2025. 

The report appears to blame the Biden administration for the backlog, but tax-related identity theft has been a longstanding problem under earlier presidential administrations. 

To cope with the problem, IRS officials increased the number of trained staff to address the identity theft case backlog, but more improvements are needed, the report pointed out. The Trump administration has cut over 25% of the IRS workforce, including the Taxpayer Advocate Service, which assists many identity theft victims.

In addition, the Identity Theft Victim Assistance function lost nearly 300 assistors, including many experienced staffers, in part due to the federal government's Deferred Resignation Program. IDTVA management said it takes approximately 18 months for a new assistor to become fully trained in all accounts management case processing areas and capable of working on complicated identity theft cases.

Identity theft cases are generally handled on a first in, first out basis and remain unassigned until an IRS staffer is available. But TIGTA found that 114 cases closed in fiscal year 2023 took nearly two years on average to process. Most of this time, though, was spent waiting for an assistor to be available to work on the case. Those delays proved to be costly. TIGTA calculated that the IRS paid approximately $124.2 million in refund interest on the identity theft cases it eventually closed in recent years.

TIGTA also estimated that over 50,000 taxpayers did not receive status updates about the progress on their identity theft cases. In fiscal year 2024, the IRS revised its policies to stop sending acknowledgment letters about taxpayer-initiated cases due to the potential for fraud. It doesn't even mail acknowledgement letters to taxpayers if the IRS identifies the potential identity theft. 

"In these IRS identified cases, the taxpayer may not know that their return has been flagged for potential IDT and individuals may be deprived of the information needed to protect themselves from further harm," said the report. "In either case, this means that some taxpayers do not hear anything from the IRS about the status of their IDT case while they wait on average almost 20 months for the IRS to resolve their cases."

TIGTA made three recommendations in the report to the IRS, including developing procedures to expedite assignment of cases to active inventory; developing and implementing procedures for providing identity theft acknowledgment letters to all affected taxpayers upon receipt of a Form 14039, Identity Theft Affidavit, claim or when potential identity theft is suspected on a taxpayer's account; and that Taxpayer Services develop a process to verify that acknowledgment letters are sent, as appropriate, and that all taxpayers receive a closing letter. IRS management agreed with two of our recommendations. The IRS disagreed with the third recommendation, stating it already has processes in place to verify the appropriate acknowledgment and closing letters are sent.

"We agree that cases should move to resolution as quickly as possible," wrote Kenneth Corbin, chief of the IRS's Taxpayer Services Division, in response to the report. "We do not believe adding a separate pre-assignment screening step would improve timeliness with current resources. Determining whether a case can be resolved quickly generally requires much of the same research needed to resolve it. Using trained employees to perform a second screening step could duplicate work and reduce the number of employees actively closing cases. We will continue using case types, employee skill levels, and other available tools to directly work and identify opportunities to move cases more efficiently."

Introductory bullet points created by AI with editorial review