More than 500,000 Americans find themselves in a distressing financial limbo, awaiting tax refunds stolen by identity thieves. The Internal Revenue Service (IRS), grappling with significant operational challenges, is taking an average of 20 months to resolve these complex cases. This alarming statistic, detailed in a recent report by the National Taxpayer Advocate, highlights a critical failure in taxpayer protection and service, labeling these delays as "unconscionable." The ongoing backlog is not merely a bureaucratic inconvenience; it represents profound financial hardship for hundreds of thousands of households.
National Taxpayer Advocate Erin Collins, in her stark assessment, underscored the human cost of these protracted delays. For many low- and middle-income taxpayers, their annual refund is a vital financial lifeline. Its prolonged absence can precipitate severe consequences, including falling behind on essential expenses like rent, utilities, and transportation. This situation creates a cascading financial impact, pushing vulnerable individuals and families deeper into economic precarity.
What is Tax-Related Identity Theft?
Tax-related identity theft occurs when a malicious actor illegally obtains and uses an individual’s personal information, most critically their Social Security number (SSN), to file a fraudulent tax return. The primary objective is to claim a refund before the legitimate taxpayer can submit their own return. Once the fraudulent return is processed, the ill-gotten refund is typically diverted to accounts controlled by the criminal, such as bank accounts, prepaid debit cards, or through mail drops.
The scale of this crime is significant and growing. In 2025, the FBI’s Internet Crime Complaint Center (IC3) recorded over 1,000 complaints pertaining to tax identity theft, marking a 26% increase from the previous year. This surge underscores the escalating threat posed by cybercriminals and the increasing sophistication of their methods. For the genuine taxpayer, discovery of such fraud instantly flags their legitimate return, leading to the withholding of their expected refund and an arduous journey through an administrative maze that is often described as frustrating, burdensome, difficult to navigate, and exceptionally time-consuming.
Why the Wait is So Long — and Getting Longer
The current state of affairs within the IRS largely explains the exasperating delays. The agency has experienced dramatic workforce reductions. At the commencement of the 2026 tax filing season, the IRS’s employee count stood at 74,000, a substantial 27% decrease from the 102,000 employees a mere year prior. These cuts, driven in part by mandates from the Department of Government Efficiency, have severely hampered the IRS’s capacity to handle cases requiring manual intervention.
Identity theft cases are inherently complex, demanding individualized assistance, meticulous manual review, and considerable flexibility from agency personnel. They cannot be efficiently resolved through automated systems. Consequently, these staffing shortages disproportionately affect identity theft victims. The situation has visibly deteriorated since 2023, when the National Taxpayer Advocate first highlighted severe delays, noting a backlog of approximately 484,000 cases with an average resolution time of 19 months. Today, the backlog exceeds 500,000 cases, and the resolution timeline has stretched to 20 months, indicating a worsening trend.
Economic Impact on Vulnerable Filers
The financial ramifications are particularly acute given the current economic climate. According to IRS data cited by CBS News, the average tax refund for the 2026 filing season is $3,462. This figure represents an 11% increase over the previous year, largely attributable to new deductions introduced under President Donald Trump’s "One Big Beautiful Bill Act." While larger refunds are generally welcome, their delay creates significant challenges.
A LendingTree survey involving over 1,500 tax filers revealed that 46% of Americans are depending on their tax refund this year, a 36% rise from 2023. This dependency underscores the critical role refunds play in managing household budgets, especially for lower-income filers who rely on this money for basic living expenses. When these anticipated funds are held up for nearly two years, it can trigger a cycle of debt, missed payments, and increased financial stress.
What You Can Do to Protect Yourself
Given the prolonged resolution times and the IRS’s strained resources, proactive prevention is paramount. The most effective defense against tax identity theft, as recommended by the IRS itself, is to obtain an Identity Protection PIN (IP PIN).
- Identity Protection PIN (IP PIN): This is a unique, six-digit number issued by the IRS to eligible taxpayers. When you have an IP PIN, it must be included on any tax return filed using your Social Security number. This critical requirement makes it virtually impossible for fraudsters to file a return in your name without this specific PIN. A new IP PIN is generated annually, and enrollment is available directly through IRS.gov.
- Report Fraud Immediately: If you suspect or confirm that you have been a victim of identity theft, the FBI urges you to file a report with the Internet Crime Complaint Center (IC3) at IC3.gov as quickly as possible. Reporting promptly can aid in investigations and, if confirmed as a victim, the IRS will automatically enroll you in the IP PIN program for future protection.
- Credit Freezes: Beyond tax-specific measures, placing a credit freeze with all three major credit bureaus—TransUnion, Equifax, and Experian—is a crucial step. A credit freeze restricts access to your credit report, preventing new credit accounts from being opened fraudulently in your name while your identity theft case is being processed. This can mitigate further financial damage.
The bottom line is clear: with a resolution period extending to 20 months and the IRS unlikely to see significant staffing improvements in the short term, prevention is the only reliable strategy that aligns with your financial timeline. Safeguard your identity proactively to avoid becoming another statistic in the growing tax refund backlog.
Article Sources
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Taxpayeradvocate Irs (1); Ic3 (2), (6); Cbsnews (3); Lendingtree (4); Irs (5); Transunion (7); Equifax (8); Experian (9)
This article originally appeared on Moneywise.com under the title: Over 500,000 Americans are stuck waiting 20 months for the IRS to return refunds stolen by identity thieves
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
Frequently Asked Questions (FAQs)
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What is an Identity Protection PIN (IP PIN) and how does it prevent tax identity theft?
An Identity Protection PIN (IP PIN) is a six-digit number issued by the IRS that must be included on your tax return. It acts as a shield against tax identity theft by preventing criminals from filing fraudulent returns using your Social Security number, as they won’t have the unique PIN. A new IP PIN is generated annually and can be obtained through IRS.gov.
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How does IRS understaffing affect taxpayers, particularly those with identity theft claims?
Significant IRS understaffing, including a 27% reduction in workforce from 102,000 to 74,000 employees in a year, severely impacts manual case resolution. Tax identity theft cases require individualized attention and manual review, which become severely delayed when staff are scarce. This leads to extended waiting periods for victims to receive their rightful refunds, exacerbating financial distress.
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What are the immediate financial consequences for taxpayers whose refunds are delayed due to identity theft?
For many low- and middle-income taxpayers, delayed refunds mean direct financial hardship. They often rely on these funds to cover basic living expenses such as rent, utilities, and transportation. A delay of nearly two years, as currently experienced, can lead to missed payments, accumulating debt, and significant stress, disrupting their financial stability.
