Taxpayers in California and across the nation may have to wait a little longer for their tax refunds this year, in part because the IRS is trying to minimize the risk of identity theft. This has become a big problem in recent years, not only for the IRS, but for anyone who becomes a victim. Refunds can be delayed by several months for the legitimate taxpayer if there is a case of identity theft. In addition, the National Taxpayer Advocate states that victims do not get enough assistance from the IRS.
The tax filing process became more vulnerable to fraud once the IRS reduced the waiting time for refunds. Criminals who illegally acquire Social Security numbers can falsify wage reports and tax returns, submitting them for rapid refunds that can be converted to cash or deposited on a temporary debit card. It is often the case that criminals have the tax refund in hand before the taxpayer even files the legitimate return.
For years, the IRS has been slowing down the refund process and examining the returns more closely in order to cut down on the amount of identity theft. In the past two years, the agency prevented $34 billion in fraudulent returns from being processed. This year, they are including more filters in their screening process to flag certain returns for closer scrutiny.
The National Taxpayer Advocate is concerned that the current system could cause years of hassle for legitimate taxpayers who become victims of identity theft. The IRS Advisory Council has proposed changes that are designed to benefit both the taxpayers and the IRS. Until there are more protections in place for the taxpayer, any California resident who experiences identity theft may wish to examine their legal options as they work to resolve the issue with the IRS.
Source: Contra Costa Times, "IRS seeks to stop ID theft," Richard Rubin, Jan. 30, 2013