Identity theft victims waited 20 months for IRS case resolution

The title of a newly released watchdog report says it all about the IRS process for resolving identity theft cases: It is long, costly, and frustrating.

Taxpayers waited an average of nearly 20 months for the IRS to resolve those cases from fiscal years 2023 through 2025, according to the Treasury Inspector General for Tax Administration (TIGTA).

The delays have drawn repeated criticism from National Taxpayer Advocate Erin Collins, who called them “unconscionable” in her annual reports to Congress.

Identity theft cases arise when someone uses another person’s name and taxpayer identification number to file a fraudulent tax return. The IRS aims to resolve those cases within 120 calendar days, but a persistent backlog of cases made the wait far longer for many taxpayers, TIGTA said.

The report, The Process to Resolve Identity Theft Cases Is Long, Costly, and Frustrating for Taxpayers, reviewed 114 identity theft cases closed during fiscal year 2023 and found that they took an average of 655 days to process. Only four cases were completed within the IRS’s 120-day goal. Most of the delay occurred before an employee was assigned to the case, with the average case spending 533 days in an unassigned inventory.

The watchdog estimated the IRS paid about $124.2 million in interest on delayed refunds tied to identity theft cases closed from fiscal years 2023 through 2025. According to TIGTA, the amount rose from about $17.1 million in fiscal year 2023 to $45.6 million in fiscal year 2024 and $61.6 million in fiscal year 2025.

IRS management has taken steps to reduce the backlog, including increasing the number of fully trained assistors who work identity theft cases and creating initiatives to process certain categories of cases more efficiently, according to the report. Still, TIGTA noted that nearly 316,000 identity theft cases remained unresolved at the end of September 2025.

The report also found that taxpayers often received little information about the status of their cases while they waited. TIGTA estimated that more than 50,000 taxpayers did not receive required identity theft case correspondence in fiscal year 2023. In TIGTA’s review of the 114 cases, just 33 taxpayers were confirmed to have received acknowledgment letters. The IRS could not document whether letters had been sent in 45 cases.

The TIGTA report also noted that the IRS doesn’t send acknowledgment letters to taxpayers if the agency discovers a case of potential identity theft.

“In these IRS-identified cases, the taxpayer may not know that their return has been flagged for potential [identity theft], and individuals may be deprived of the information needed to protect themselves from further harm,” the report said.

The findings mirror concerns Collins has raised for several years. In her 2024 Annual Report to Congress, Collins identified identity theft processing delays as one of the most serious problems facing taxpayers and said victims were experiencing “unconscionable delays” while waiting for the IRS to process returns and issue refunds. Collins’ report said average processing times increased from 556 days at the end of fiscal year 2023 to 676 days at the end of fiscal year 2024.

Collins warned in an earlier annual report that some identity theft victims could go through the entire process and receive only one letter from the IRS when their case was finally closed.

TIGTA recommended that the IRS develop procedures to evaluate case complexity and expedite the assignment of cases, provide acknowledgment letters when identity theft is reported or suspected, and establish a process to verify that taxpayers receive required correspondence. The IRS agreed with the first two recommendations but disagreed with the third, saying existing review processes already ensure appropriate letters are sent.

The IRS also said it will assess whether artificial intelligence could help evaluate case complexity and support case assignments.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.