IRS mired in backlog of identity theft cases, report finds
The IRS is still digging out of a pandemic-fueled backlog of identity theft claims in which it takes the tax agency an average of 20 months to process a case, according to a new watchdog report.
Identity theft occurs when someone uses another person’s name and Taxpayer Identification Number to file a false tax return and then claim that fraudulent refund.
According to the Treasury Inspector General for Tax Administration, case receipts with the agency’s Identity Theft Victim Assistance (IDTVA) unit almost quadrupled in volume in fiscal 2021, due in large part to the COVID-19 pandemic.
Five years later, the IRS is still dealing with “significantly elevated” case receipts “due to the increased prevalence and sophistication” of identity theft fraud, per the report. The beginning inventory of cases in fiscal 2025 was 473,608, and the agency finished the year at 315,740.
“The current backlog of IDTVA cases delays taxpayer refunds, which may create financial hardship for taxpayers and increases the risk of the IRS paying interest on the delayed refund to the taxpayer,” TIGTA wrote.
The IRS’s goal is to resolve identity theft claims within 120 calendar days of receipt. But in a review of 114 cases that were closed during fiscal 2023, TIGTA found only four were closed within that timeframe, with an average processing time of 655 calendar days.
“These lengthy delays can frustrate and burden taxpayers while they wait to receive their refunds,” the report said. “Delayed refunds are costly to the federal government. Our analysis of [identity theft] cases closed from FY 2023 through FY 2025 identified that the IRS paid approximately $124.2 million in interest on the delayed refunds.”
There was a silver lining to TIGTA’s findings: Once cases were assigned to an assistor, the IRS resolved them quickly. According to the report, 54% of taxpayer self-reported identity theft cases were resolved within 30 days once an assistor got involved.
“Notably, a small percentage of [identity theft] cases we reviewed were processed within the same day they were assigned to an assistor,” the report said.
TIGTA recommended that the IRS adopt procedures to evaluate the complexity of cases and accelerate their assignments to support staff. The agency agreed with the recommendation, though it said it would explore the use of artificial intelligence to aid in those efforts “instead of redirecting full-scope identity theft trained employees to screen cases.”
“IRS management will determine the next appropriate steps based on the results of that assessment,” the watchdog added.
