Hundreds of thousands of taxpayers experience significantly delayed refunds every year because of tax-related identity theft. That delay lasted an average of 278 days — more than nine months — according to a new audit of tax accounts resolved in fiscal year 2013 (Oct. 1, 2012 through Sept. 30, 2013) by the Treasury Inspector General for Tax Administration. The audit was intended as a follow-up on a previous review to see if the IRS had improved its dealings with identity theft victims.
Well, the delays are still significant, but things seem to have gotten a bit better. The average delay is 34 days shorter than TIGTA found in a previous review, but such long delays can be a huge financial and emotional burden for victims in need of their refunds.
On top of the long waiting periods, TIGTA found that 10% of identity theft cases the IRS resolved were done so incorrectly, resulting in further delays in getting the victim his or her accurate refund. The review found that the time from when the IRS received victims' tax returns until the IRS paid the correct refund ranged from 16 to 762 days.
Much of the delays come from having the cases repeatedly reassigned to (and sitting on the desks of) assistors. In its prior review, TIGTA found that cases were reassigned an average of 10 times before being resolved, and the frequent transfers often contributed to inactivity on the cases. It all adds up to longer delays between sending a tax return and receiving a refund.
This most recent audit showed that transfers have declined — a case is now reassigned to an average of seven assistors before getting resolved — and the average inactivity on the cases declined, as well, from 277 days to 254 days. Auditors asked accounts management officials about the reasoning behind frequent transfers and summarized the interviews in the report:
"The officials could not recall the specific circumstances as to why these cases were frequently reassigned among the holding queues. … The IRS informed us that the cases are complex and IRS management is more interested in identifying a trained employee to work an identity theft case than the number of case reassignments. Thus, cases can remain in a manager's inventory, unassigned to an assistor, until the manager finds an available identity theft trained assistor."
Like many issues at the IRS, the delays stem from limited resources that continued to be strained by budget cuts.
Tax-related identity theft is a huge problem. The IRS stopped $50 billion in fraudulent tax returns related to identity theft last year, but it lost $5.2 billion to the same problem. Consumers caught up in it may want to plan to deal with the IRS with a mix of patience and persistence. Each year, it's a good idea to file your taxes as soon as you can, because identity thieves' strategy is to get to your refund before you do. Additionally, monitor your credit for signs of identity theft on a regular basis, so you can avoid or address other financial messes that result from fraud. You can see a summary of your credit report, updated monthly, on Credit.com.
More from Credit.com