Tax controversies often involve questions about the actions of taxpayers who may or may not have intended to file a false return. However, recent reports show a significant increase in fraudulent returns filed in connection with taxpayers’ stolen identities.
The IRS has reported a significant rise in the number of identity theft cases, which are impacting taxpayers and IRS resources. These fraudulent filings have also caused delays in the agency’s processing of returns. In fact, California ranks among the top three states per capita in tax controversy claims such as identity theft, and the IRS is currently struggling to keep up with the burgeoning number of cases.
In 2011, 940,000 questionable tax returns were reported in the U.S., and though this number illustrates a 72 percent increase in questionable returns, the IRS has only increased staff to verify these returns by roughly 9 percent, leaving a huge gap in resources.
Identity theft may not be on the top of the list of tax controversies, but the threat is real and spreading at an alarming rate. Furthermore, the IRS appears to be ill-equipped to handle the number of identity theft cases, causing taxpayers to do without their refunds and remain engaged in IRS disputes for increasingly long periods of time. The estimated 90-day period for tax dispute resolution is unrealistic, with the average case taking over a year to resolve.
Taxpayers in California may find that their efforts in dealing with the IRS are time-consuming and even futile if the case is tackled alone. The IRS is understaffed and overwhelmed, and the agency may be unable to effectively handle every individual’s questions and tax concerns in a timely manner. In this economy, many people rely on their tax refunds to pay debt, take that well deserved vacation, or simply put money aside for a rainy day. But when identities are stolen, the path to these goals becomes curvy.
Taxpayers who are facing similar problems would do well to keep accurate documentation while communicating with professionals who can help expedite what can may otherwise seem a never-ending process.
Source: The News & Advance, “IRS fails tax fraud victims, new report finds,” Elaine Silvestrini, May 9, 2012