More than half a million Americans are currently enduring a staggering 20-month wait for the Internal Revenue Service (IRS) to process and return tax refunds stolen through identity theft. This alarming statistic comes from a new report by the federal government’s internal tax watchdog, underscoring persistent operational challenges and their profound impact on taxpayers.
The National Taxpayer Advocate’s report is unequivocal, labeling these prolonged delays as “unconscionable.” It issues a stark warning that this backlog is not abating but continues to grow, mirroring a nationwide surge in tax-related identity theft incidents (1). For many low- and middle-income taxpayers, their anticipated refund is not merely discretionary income but a critical financial lifeline. As National Taxpayer Advocate Erin Collins highlights, waiting nearly two years for a refund is far beyond a minor inconvenience; it can precipitate severe financial hardship, jeopardizing their ability to cover basic living expenses such as rent, utilities, and transportation costs (1). This delay forces vulnerable households to make difficult choices, often leading to increased debt or a compromised standard of living.
Understanding Tax-Related Identity Theft
Tax-related identity theft is a sophisticated and insidious form of financial crime. It typically begins when criminals illegally obtain a taxpayer’s personal information, most critically their Social Security number (SSN). With this stolen data, they proceed to file a fraudulent tax return, often before the legitimate taxpayer has filed their own. The objective is to claim a tax refund, which is then swiftly diverted into accounts controlled by the perpetrators, frequently involving obscure bank accounts, reloadable prepaid debit cards, or anonymous mail drops (2).
The scale of this issue is considerable and expanding. In 2025, the FBI’s Internet Crime Complaint Center reported receiving over 1,000 complaints specifically concerning tax-related identity theft within a single year. This represents a significant 26% increase from the prior year, indicating a worsening trend. When the legitimate taxpayer eventually attempts to file, their return is flagged by the IRS as a duplicate, initiating a complex administrative process. This labyrinthine procedure, described by Collins as “frustrating, burdensome, difficult to navigate and time-consuming,” results in the taxpayer’s rightful refund being withheld, effectively trapping their money within the IRS’s burgeoning backlog (1).
IRS Staffing Shortfalls Drive Prolonged Waits
The root cause of these extended resolution times for identity theft cases lies squarely with the IRS’s diminished operational capacity. The agency has undergone dramatic staffing reductions in the past year, a trend partly driven by budget cuts and directives from entities like the Department of Government Efficiency. At the commencement of the 2026 tax filing season, the IRS workforce stood at approximately 74,000 employees. This marks a substantial 27% reduction from the 102,000 employees it had just a year earlier (1).
This decline in personnel has profound implications for tax administration. While automated systems can efficiently handle many routine cases, identity theft claims fall into a category requiring intricate, manual review and personalized assistance. These human-intensive processes are precisely where staffing shortages create critical bottlenecks. National Taxpayer Advocate Collins first raised concerns about severe identity theft delays in 2023, when the IRS was grappling with a backlog of approximately 484,000 cases, with resolution taking about 19 months. The current situation has deteriorated further: the backlog now exceeds 500,000 cases, and the average resolution time has stretched to a daunting 20 months (1).
Disproportionate Financial Strain on Vulnerable Taxpayers
The financial stakes involved in these delays are particularly high for lower-income filers, who often depend on their tax refunds for immediate financial stability. According to IRS data reported by CBS News, the average tax refund for the current filing season is $3,462. This figure represents an 11% increase from the prior year, a rise partly attributed to new deductions enacted under President Donald Trump’s One Big Beautiful Bill Act (3).
For a significant portion of the population, this refund is a crucial component of their annual income, allocated for managing household budgets, covering unexpected expenses, or even building a modest emergency fund. A LendingTree survey of over 1,500 tax filers underscores this reliance, revealing that 46% of respondents are depending on their refund this year, a notable 36% increase from 2023 (4). When these essential funds are delayed for nearly two years due to identity theft, it can trigger a domino effect of financial distress, potentially leading to eviction notices, utility shut-offs, and an inability to afford basic necessities. This disproportionate impact highlights the urgent need for a more responsive and efficient resolution system.
Proactive Strategies for Taxpayer Protection
Given the IRS’s current operational challenges and the prolonged waiting periods for resolving identity theft cases, proactive prevention remains the most effective defense for taxpayers. The IRS itself strongly recommends obtaining an Identity Protection PIN (IP PIN) (2). This unique six-digit number, assigned to taxpayers, must be included on any tax return filed using your Social Security number. This critical requirement makes it nearly impossible for fraudsters to successfully file a return in your name without obtaining your specific PIN. A new IP PIN is generated annually, and taxpayers can easily enroll in this program through IRS.gov (5).
For individuals who suspect they have already been victimized, immediate action is crucial. The FBI advises filing a report with the Internet Crime Complaint Center (IC3.gov) as promptly as possible (6). Furthermore, the IRS automatically enrolls confirmed victims of tax-related identity theft into the IP PIN program, adding a vital layer of protection for subsequent tax years (2). An additional, highly recommended preventative measure involves placing a credit freeze with all three major credit reporting bureaus: TransUnion (7), Equifax (8), and Experian (9). A credit freeze restricts access to your credit report, effectively preventing identity thieves from opening new fraudulent accounts in your name while the IRS works through your identity theft case. In a climate where tax refund resolutions can take 20 months and IRS staffing remains a challenge, personal vigilance and robust preventative measures are indispensable for safeguarding one’s financial well-being.
Frequently Asked Questions (FAQ)
Q1: How does tax identity theft primarily occur?
Tax identity theft typically occurs when a criminal obtains a taxpayer’s Social Security number (SSN) and other personal information. They then use this stolen data to file a fraudulent tax return before the legitimate taxpayer, aiming to claim a refund that is then directed to the criminal’s accounts or prepaid cards.
Q2: What is an Identity Protection PIN (IP PIN) and why is it important?
An Identity Protection PIN (IP PIN) is a six-digit number issued by the IRS to taxpayers as a proactive defense against identity theft. It’s important because it acts as a unique authenticator; any tax return filed with your SSN must include your current IP PIN, making it significantly harder for fraudsters to file a return in your name without it.
Q3: Besides an IP PIN, what other steps can I take if I suspect tax identity theft?
If you suspect tax identity theft, immediately file a report with the FBI via IC3.gov. Additionally, place a credit freeze with the three major credit bureaus (TransUnion, Equifax, and Experian). This prevents new fraudulent accounts from being opened in your name, which often accompanies identity theft scams.
