IRS May Delay Tax Refunds Until Summer

Tax season might be over, but there may be giant changes concerning your tax refund. Rather than waiting two weeks for to get money back, you might wait a couple of months. That is one offer being debated on Capitol Hill as Congress decides on the easiest way to fix a problem that is injuring innocent taxpayers.

IRS identity theft is rampant, and already impacted 460,000 taxpayers, including Katie Angle. She filed her taxes on paper to avoid any charges. Angle predicted it may take longer since she didn’t file electronically. She waited 2 months, and still no refund. Finally, she called a tax filing company.

“The representative asked me if I ever lived in Georgia. My heart sunk, and I told her I hadn’t,” Angle explained.

Without the info from the accountant, Angle wouldn’t know anything. Angle claimed the IRS never even contacted her about the compromised return.
“They’re treating me like the criminal rather than the victim,” Angle said.

When you’re a victim of tax fraud, it can take anywhere up to a year to get your money, although the culprit already received a lot of money. Angle said the alleged thief received more than six times the amount of her refund. It’s hard not to wonder how this happen without the IRS seeing the inflated refund.

The IRS told Congress in March it’s catching “some” of the crime, but it simply can’t stop all identity theft. The agency is doing what it can with the current staffing and funding, which some note needs to be seriously increased. As of early March, the IRS said 215,000 dubious returns were stopped. However, only 1 in 7 of those taxpayers who had their return stopped could actually get through to the IRS. Those who did waited on hold for over an hour.

One Congressional leader at the hearing called the hour wait “unconscionable.” Congressional representatives are the only ones who can actually help victims. Congresswoman Betty Sutton’s office was contacted on behalf of Miss Angle. Contacting your local representative can expedite getting answers about your tax return that nobody else can provide due to privacy issues.
Angle doesn’t think enough is being done to help victims.

“It’s insane how many hours I spent on the telephone, and I just got no answers,” Angle asserted. There are privacy issues that are being worked out in order to share info with victims and law enforcement.

“It should be noted that the existing rules for defending taxpayer privacy often make it difficult for us to provide easy access to information that might be useful for local law enforcement. We are, nevertheless, developing a procedure by which we’ll be ready to share falsified returns with local law enforcement by way of getting a privacy waiver from the trusting taxpayer,” IRS Assistant Commissioner Steven Miller told a Congressional board.

There have been indictments for IRS related ID theft, but it’s a time consuming problem and many victims never seen someone prosecuted. In economic year 2011, the IRS Criminal Enquiry team spent 225,000 hours looking into ID theft. This year, that’s expected to double.

One solution debated on Capitol Hill is to delay refunds till summer so the IRS can compare returns and spot crime more readily.

“Such a shift would allow the IRS enough time to study each suspicious return. Just as importantly, the IRS would have at its disposal the full armory of info reporting databases- including complete information on salary and withholding, interest earnings, dividends, capital gains and partnership earnings – and could better detect and resolve discrepancies and dubious returns,” expounded Countrywide Taxpayer Advocate Nina E. Olson.

The advocate noted such a change would be a huge cultural shift and could financially hurt millions of taxpayers who depend on a reimbursement immediately after they file.

“Alternatively, if we prefer not to delay the processing of refunds for half a year but still insist firmly on bigger crime detection than the IRS is presently in a position to manage, then Congress would need to authorize significantly more funding for the IRS,” Olson said. “It is impractical to expect the IRS to stay abreast of its augmenting workload without either allotting a correspondent increase in resources or extending the time period in which to conduct the obligatory wage and withholding verification.”

It’s a fragile balance the IRS and Congress are attempting to figure out. Identity theft is a complex problem, and it’s unclear why so many taxpayers are becoming victims.

During affidavit in congress it was noted that ID theft can be largely attributed to organized crime.