IDENTITY THEFT (IDT): The IRS’s Procedures for Assisting Victims of IDT, While Improved, Still Impose Excessive Burden and Delay Refunds for Too Long

Tax-related identity theft (IDT) occurs when an individual intentionally uses the personal identifying information of another to file a falsified tax return with the intention of obtaining an unauthorized refund. As of the end of fiscal year (FY) 2015, the IRS had over 600,000 IDT cases with taxpayer impact in its inventory, nearly 2.5 times its IDT inventory from FY 2014.

In July 2015, the IRS reorganized its IDT victim assistance functions, centralizing them within the Wage and Investment division. While the National Taxpayer Advocate is pleased the IRS has finally adopted this approach, she continues to have concerns about the IRS’s IDT victim assistance procedures. For example, the IRS still does not assign a sole IRS contact person to interact with IDT victims with multiple tax issues, it does not track IDT cycle time in a way that accurately represents the taxpayer’s experience, and it continues to limit the availability of Identity Protection Personal Identification Numbers (IP PINs) to a small segment of the population.

The inadequacy of the IRS’s IDT victim assistance is demonstrated by the growth in TAS IDT cases, which comprised 25 percent of TAS’s case receipts for FY 2015. A significant portion of these cases is attributable to false positives from IRS screening mechanisms; in one program, approximately one out of three returns suspended by the IRS were legitimate returns.

In September 2015, the IRS convened the IDT Re-engineering Team, a group of employees from across various functions tasked to review current procedures and make recommendations to improve the processing of IDT cases. We will work with the new Identity Theft Victim Assistance unit to further improve service to this vulnerable population.