Identity Theft Case Delays and Fraudulent ERC Claims Challenge Agency's Progress

An independent watchdog within the IRS has reported that despite improvements in taxpayer services, the agency remains too slow in resolving identity theft cases. National Taxpayer Advocate Erin Collins' report highlights worsening delays in handling self-reported identity theft cases compared to the previous report. As of April, the IRS took over 22 months to resolve these cases and had about 500,000 unresolved cases in its inventory. These delays are especially problematic for low-income taxpayers who depend on tax refunds for daily living expenses and may face difficulties securing loans.

"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," said Ms. Collins. However, she emphasized that the ongoing delays in resolving cases are "unconscionable." Her report also expressed concerns about fraudulent employee retention credit (ERC) claims disrupting tax collection operations. "The IRS is between a rock and a hard place regarding ERC claims," she stated. "If it pays out ERC claims without adequate review, improper payments could total in the tens of billions of dollars. If it refuses or delays ERC payments, the very businesses for which Congress created the ERC will suffer again."

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