IRS Finally Fixes Long-Overdue Issues for ID Theft Victims

While the IRS hits the pause button on some job offers due to a hiring freeze executive order signed by the President on January 20, 2025, there’s finally some good news for taxpayers who’ve been stuck in identity theft limbo! The once confusing and painfully slow process of resolving identity theft cases is getting a much-needed speed boost. Yes, the IRS is making strides in cutting down those agonizing wait times—though let’s be real, there’s still a long way to go before the backlog is fully cleared. So, how did we get here? What’s changing? And most importantly, what does this mean for you as we dive into a brand-new tax season? Let’s break it down!

How Did It Get This Bad?

Imagine waiting nearly two years just to resolve a tax-related identity theft case. That was the reality for many taxpayers in recent years. According to National Taxpayer Advocate Erin Collins, processing times for identity theft victim assistance cases ballooned from 399 days in 2022 to 556 days in 2023, then skyrocketed to 676 days in 2024. Why the delay? A perfect storm of factors:

• A three-fold surge in identity theft cases starting in 2021, was largely fueled by fraudsters exploiting pandemic-related tax relief programs.
• The IRS’s outdated manual review processes struggled to keep up with the influx of cases.
• Staffing shortages and operational inefficiencies left cases stuck in limbo.

Taxpayers and professionals who were already part of such process faced additional frustrations: refund delays, incorrect tax notices, and months—if not years—of back-and-forth with the IRS just to prove their identity.

The IRS Trims the Fat on Delays

So, what’s different now? The IRS is taking aggressive steps to cut down on the backlog. In fiscal year 2025, the average processing time for ID theft victim assistance cases has been reduced to 506 days—not exactly great, but a notable improvement from the 676-day nightmare everyone endured last year.

The agency has also prioritized a subset of 45,000 backlogged cases that involve potential refunds, slashing their processing time to 100 days—a significant drop compared to previous years. Since July 2024, the IRS has received an additional 5,500 ID theft cases, which are now being processed in roughly 100 days as well. While these numbers aren’t groundbreaking, they show that the IRS is actively working to dig itself out of this hole. For taxpayers and professionals stuck in IRS purgatory, any improvement is a welcome relief.

Why This Matters for the 2025 Tax Season

The IRS’s effort to cut down processing times doesn’t just help past victims—it’s also a plus and here’s how:

• Faster Refund Processing – Victims of ID theft often face refund delays due to pending case resolutions. With a more efficient system in place, taxpayers should see quicker access to their legitimate refunds.
• Reduced IRS Backlog – Clearing the backlog allows IRS staff to focus on current tax filings instead of getting buried under unresolved past cases.
• Improved Fraud Detection – The IRS is simultaneously beefing up fraud prevention methods, making it harder for identity thieves to commit tax-related fraud in the first place.

However, taxpayers and professionals still need to be cautious. The Treasury Inspector General for Tax Administration (TIGTA) has already flagged an increase in scammers impersonating the IRS, sending phishing texts and emails to trick people into handing over sensitive information. The latest scam? Fraudsters pretending to offer Economic Impact Payments to steal personal data.

How Can We Protect Ourselves?

While the IRS is making strides in reducing wait times, preventing identity theft in the first place is still the best defense. Here are some practical steps we all can take:

• Secure Your Online Accounts – Use strong, unique passwords and enable multi-factor authentication for added security.
• Beware of IRS Scams – The IRS never initiates contact via text, email, or social media. Any message claiming otherwise is a red flag.
• Get an Identity Protection (IP) PIN – This IRS-issued PIN adds an extra layer of security when filing tax returns, making it harder for fraudsters to file in your name.
• Monitor Your Tax Records – Request a copy of your IRS transcript periodically to check for any suspicious activity.
• Report Identity Theft Immediately – If you suspect tax-related ID theft, file Form 14039 (Identity Theft Affidavit) with the IRS and alert the Federal Trade Commission (FTC).

A Step in the Right Direction, But More Work Ahead

The IRS’s decision to speed up identity theft case processing is a much-needed improvement, but it’s far from a complete fix. Taxpayers who have already waited months or years for case resolutions may still feel frustrated, and for good reason. But here’s the real question: If it took the IRS years to recognize the problem, how long before they fully fix it? As the 2025 tax season kicks off, the best thing taxpayers can do is stay informed, stay cautious, and take steps to safeguard their personal information. Because while the IRS is working to clean up its mess, identity thieves aren’t going anywhere. Stay ahead of the game—get the latest insights, trends, and expert updates delivered straight to your inbox! Subscribe now and never miss a beat!