‘Unconscionable’ delays in ID theft cases

June 27, 2024

By Martha Waggoner, for the Journal of Accountancy

IRS delays in resolving identity theft cases are unconscionable and a blemish on the agency's overall performance for the 2024 tax season, the national taxpayer advocate said Wednesday in her midyear report to Congress.

As of April, the IRS was taking over 22 months to resolve cases in its identity theft victim assistance unit, which had about 500,000 unresolved cases, National Taxpayer Advocate Erin Collins wrote in the preface to her 2025 Objectives Report to Congress.

These numbers are higher than when Collins highlighted the problem in her 2023 report to Congress. In that report, released in January, she said the IRS was taking about 19 months to resolve identity theft cases. As of Sept. 30, 2023, the agency had 484,000 cases in inventory. "I called the delay unconscionable, and IRS leaders agreed to prioritize reducing delays," she wrote in this midyear report.

Collins said she now reiterates the breadth of the problem. "Delays of nearly two years make a mockery of the right to quality service in the Taxpayer Bill of Rights," the report said. "The IRS must prioritize assistance for these victims and fix this problem quickly."

Identity theft cases typically arise when the IRS rejects a return because an identity thief previously filed a fraudulent return using the personal identifying information of the taxpayer, such as a Social Security number. While the IRS investigates which taxpayer is legitimate, refunds and credits are not paid.

Of the taxpayers involved in cases that the IRS resolved as of Sept. 30, 2023, 69% had adjusted gross incomes at or below 250% of the federal poverty level, Collins wrote. "That means those taxpayers were disproportionately likely to qualify for refundable tax credits and disproportionately likely to need their refunds to pay their living expenses," the report said.

Phone service

Meanwhile, the IRS directs too many resources to maintaining the level of service (LOS) on answering the phones, a metric that does not accurately reflect the phone service that taxpayers receive, the report said.

The LOS is based on answering calls to the account management (AM) line, which received 10.3 million calls during the 2024 filing season, of which customer service representatives answered 9 million. Those numbers equal an LOS of 88%.

But calls to the AM lines represent just over 25% of the total 39.9 million calls that the IRS received. Therefore, the LOS calculation ignores the other 75% of calls, which went to non-AM phone lines, the report said.

"In my opinion, the AM LOS measure has taken on outsized importance in recent years, as the IRS has allocated resources to hit ambitious but arbitrary goals that mean less than meets the eye and that consequently have required the IRS to neglect calls to non-AM telephone lines and workstreams like paper correspondence that I believe should receive higher priority," Collins wrote. "The measure is causing the IRS to prioritize the wrong work, and it needs to be replaced."

Resources put into achieving the 85% LOS goal could be spent on other problems, including resolving identity theft cases, the report said.

Signs of improvement

Still, the 2024 tax filing season went smoothly overall, the report says. And with the billions of dollars in multiyear funding that the IRS is slated to receive from the Inflation Reduction Act of 2022, P.L. 117-169, the agency will only continue to improve, Collins wrote.

"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.

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