A report from the U.S. Treasury Inspector General for Tax Administration (TIGTA) states that during 2011, 1.5 million fraudulent tax returns were processed, and refunds totaling $5.2 billion were issued to the wrong people.
In calendar year 2012, the Internal Revenue Service identified almost 1.8 million incidents of tax-related identity theft. This figure includes approximately 280,000 incidents in which taxpayers contacted the IRS alleging that they were victims of identity theft. As of midyear 2013, over 565,000 cases have been reported to the IRS.
In an address to tax professionals in Grapevine, Texas, on July 30, 2013, then-IRS Principal Deputy Commissioner and now IRS Acting Commissioner Daniel Werfel stated that there are more than 3,000 IRS employees working on identity theft. That’s more than double the number at the start of the 2013 tax filing season. On average, it takes the IRS approximately six months to resolve a tax identity theft issue. However, as the IRS is one of the federal government agencies that have been shut down as a result of the most recent budgetary gridlock within the Administration and Congress, the resolution of tax identity theft issues may take even longer once the IRS is reopened.
IRS is beginning to implement screening filters that help to prevent false returns from being processed. In addition, the IRS has started to issue identity theft PINs to those taxpayers who have been identified as victims of tax-related fraud.
Taxpayers who complete and file IRS Form 14039 (Identity Theft Affidavit) receive an Identity Theft Protection PIN (IP PIN) once their identity has been verified. Returns filed with the IP PIN will be processed as a legitimate return in the usual manner, meaning that even though a taxpayer previously had a tax-related identity theft problem, the use of the unique IP PIN issued by the IRS will allow future returns to be processed in a normal time frame.
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