IRS Steps Up Efforts to Combat Identity Theft and Refund Fraud

While stopping identity theft and refund fraud has become an increasingly important priority for the IRS in recent years, the agency announced in February that it is further expanding and intensifying its efforts to protect taxpayers and assist identity theft victims in 2013.

IRS Expands Its Enforcement Efforts

According to agency officials, by the end of 2012 the IRS had assigned more than 3,000 IRS employees, or more than twice as many as in 2011, to work on identity theft-related issues, including preventing refund fraud, investigating identity theft-related crimes, and helping taxpayers who have been victimized by identity thieves. In addition, the IRS said it has trained 35,000 employees who work with taxpayers to recognize identity theft indicators and to help people victimized by identity theft.

The IRS also reported that its criminal investigation division tripled the number of identity theft investigations it conducted in fiscal year 2012, starting 900 investigations. The agency claims its efforts are already starting to show results, as nearly 500 people have been indicted across the country on charges of identity theft. In 2012 alone, the IRS said it protected $20 billion of fraudulent refunds, including those related to identity theft, up from $14 billion in 2011. In January of this year, the IRS announced it had taken enforcement actions against a further 389 identity theft suspects in a far-reaching national sweep.

Identity Theft Incidents on the Rise

In her 2012 annual report released in January, National Taxpayer Advocate, Nina E. Olson, emphasized that the number of tax-related identity theft incidents has increased substantially in recent years. According to the report, the number of identity theft cases filed with the Taxpayer Advocate Service increased by more than 650% from 2008 to 2012, and the IRS had almost 650,000 identity-theft cases in its inventory in 2012.

“The problem has grown worse as organized criminal actors have found ways to steal the Social Security numbers (SSNs) of taxpayers, file tax returns using those taxpayers’ names and SSNs, and obtain fraudulent tax refunds,” Olson explained. “Then, when the real taxpayer files a return claiming the refund, that return is rejected.”

The IRS said it is expanding its efforts on refund fraud detection and prevention on a number of fronts in 2013, including by significantly increasing the number and improving the quality of identity theft screening filters that spot fraudulent tax returns before refunds are issued. To supplement its own criminal investigations, the agency said it is expanding a pilot program that allows local law enforcement agencies in nine states to obtain tax return data that help the IRS investigate and pursue identity thieves. In addition, the IRS reported it is collaborating with more than 130 financial institutions to identify identity theft fraud schemes and block refunds from reaching the hands of identity thieves.

“As tax season begins this year, we want to be clear that there is a heavy price to pay for perpetrators of refund fraud and identity theft,” said IRS acting Commissioner, Steven T. Miller. “We have aggressively stepped up our efforts to pursue and prevent refund fraud and identity theft, and we will continue to intensely focus on this area. This is part of a much wider effort underway for the 2013 tax season to stop fraud.”

Educating Taxpayers

The IRS is seeking to educate taxpayers about identity theft, including through a special section on, which features informational videos and tips for avoiding becoming a victim of identity theft. For example, taxpayers are advised not to carry with them their Social Security card or any documents with their Social Security number or Individual Taxpayer Identification number on it, and not to give these numbers or other personal information to businesses unless they are certain of whom they are dealing with. Taxpayers are also reminded of the importance of securing their personal and financial records at home, and of protecting their personal computers by using firewalls, anti-spam/virus software, and updating security patches.

Observing that identity theft cases are among the most complex handled by the IRS, agency officials further announced the IRS is stepping up its efforts to help victims of identity theft when prevention efforts fail. Officials noted that while identity thieves steal information from sources outside the tax system, the IRS is often the first to inform a victim that identity theft has occurred. The agency said it is putting more employees on the resolution of victim cases, and is working hard to streamline its internal process. Currently, officials said, a typical case can take about 180 days to resolve, but the IRS is working to reduce that time period.

“We are strengthening our processing systems to watch for identity theft and detect refund fraud before it occurs,” Miller said. “And we continue to put more resources on helping people who are victims of identity theft and resolve these complex cases as quickly as possible.”

If a taxpayer believes that he or she is at risk of identity theft due to lost or stolen personal information, immediately contact the IRS Identity Protection Specialized Unit at 800.908.4490. For additional information, visit