Where’s My Refund? Has Your Tax Return Been Flagged for Possible Identity Theft? (2024)

One persistent challenge the IRS continually deals with is preventing fraudulent refunds from being issued. Sadly, this phenomenon has become more and more common, as the number of refundable credits and their values continue to increase, such as the Earned Income Tax Credit (EITC), the Additional Child Tax Credit (ACTC), and the Recovery Rebate Credit (RRC). One way the IRS has addressed this issue is to screen tax returns to determine if income and wages are correct and if the legitimate taxpayer truly filed the tax return. This blog addresses issues where the IRS, through its screening process, flags the tax return as potential identity theft (IDT); processing of the tax return is suspended; and a letter is sent to the filer asking them to authenticate their identity and certain tax return items before processing can resume.

This blog will not discuss how taxpayers who are victims of IDT can work with the IRS to get their tax issues resolved. For more information, visit the Taxpayer Advocate Service (TAS) Identity Theft Get Help page.

Taxpayers whose tax returns have been flagged for possible IDT should receive one of the following letters:

These letters provide several ways taxpayers can authenticate their identity, including using an online option or calling the IRS directly. In limited situations, taxpayers will be asked to make an appointment at a Taxpayer Assistance Center and authenticate their identity in person.

In 2022, Millions of Taxpayers Never Responded to Their Authentication Letters

In 2022, the IRS suspended processing of 4.8 million tax returns and requested taxpayers authenticate their identity prior to the IRS releasing their refunds. Out of those, about two million taxpayers responded, verified their identities, and received their refunds; nearly 255,000 were confirmed as IDT; and over 2.5 million remain suspended as of December 31, 2022, because the taxpayers’ identities have still not been authenticated.

If you are still waiting for your tax refund and think your tax return may be one of the 2.5 million that remain suspended from filing season 2022 because the IRS suspects possible IDT, or you still have not received your refund from the tax return you filed in 2023, you might need to verify your identity before your refund is released.

Taxpayers should check to see if they ever received one of the letters above for tax year 2021 or 2022. If the letter cannot be located, taxpayers should check their IRS online account or call the Taxpayer Protection Program (TPP) phone line at 800-830-5084. (If a taxpayer lives outside the U.S., they should call 267-941-1000.) As of January 29, 2023, for those taxpayers who receive a letter asking them to authenticate their identity and return information online, they can go into their online account, which will tell them they need to verify information on their tax return before it can be processed. This will direct the taxpayer to the Identity and Tax Return Verification Service website. If the explanation for the suspended tax return is that the IRS is awaiting authentication of the taxpayer’s identity, an Accounts Management customer service representative will reissue the letter explaining what steps need to be taken and direct taxpayers to the Identity and Tax Return Verification Service.

On one hand, having the IRS protect against IDT is good for all, but for those taxpayers dealing with IDT or needing the IRS to release their refunds when flagged as potential identity theft, the delay causes issues, and the process is confusing and time consuming. The IRS should assist taxpayers throughout the process to reduce the burden for those properly filed tax returns.

Why Don’t Taxpayers Authenticate Their Identity?

There are a couple of explanations as to why a taxpayer may not respond to the letter and authenticate their identity, the most obvious being the tax return truly was filed by an identity thief, and the thief has abandoned their attempt to obtain a fraudulent refund. However, there are other possible explanations as to why the taxpayer’s identity has not been authenticated. The taxpayer may have never received the letter, may have moved, didn’t understand the letter, or couldn’t get through on the IRS’s phone line to authenticate their identity, as the level of service on the TPP phone line was only about 31 percent for FY 2023 as of August 5, 2023. In fact, in a recent conversation with Low Income Taxpayer Clinic (LITC) personnel on the authentication process, it was conveyed that many taxpayers – particularly taxpayers who speak English as a second language – find both the letters and the authentication process complex and confusing.

The IRS’s online tools, such as Where’s My Refund, provide taxpayers with limited information about the status of their refunds; however, this tool only tells taxpayers their tax return has been received or processed, or a refund was issued. No information is provided to taxpayers when processing of a tax return has been suspended for potential IDT. Although the IRS has agreed to make enhancements to its Where’s My Refund? tool and provide taxpayers more information about the status of their tax return, this upgrade has not been done to date. The IRS has committed to devoting some of the Inflation Reduction Act of 2022 funds to roll out several enhancements by next filing season to enhance the usefulness of the tool to taxpayers.

In response to these concerns, the IRS Wage and Investment (W&I) Division made several modifications in an attempt to improve the clarity of the letters. To further explore the issues raised by the LITCs during these conversations, TAS is working with W&I to expand this inquiry to a focus group composed of taxpayers who have received these letters. Additionally, the IRS has recently begun a pilot program in which it will send out several versions of the same type of letter asking taxpayers to authenticate their identities to determine which version is most successful in yielding a response from taxpayers. (For more information about the pilot program and the different versions of the letters, visit Understanding Your Letter 5071C or 6331C | Internal Revenue Service (irs.gov)).

Conclusion

While the IRS and TAS continue to work together to improve these letters, if you received one it is important that you respond quickly and authenticate your identity and tax return data so the processing of your tax return can be completed, and your refund issued. The letter contains the information you need to have available when you respond to the IRS. If you receive a letter and need assistance in working with the IRS to authenticate your identity and are eligible, you can reach out to an LITC, many of which work very closely with the IRS in getting these cases resolved. If you are required to authenticate your identity and lost your letter or didn’t receive one and as a result are still waiting for your 2021 or 2022 tax refund, contact the IRS to have the letter reissued. If you have attempted to authenticate your identity with the IRS but have been unsuccessful, contact TAS for assistance.

Additional Resources

Eligible taxpayers can reach out to LITCs for assistance. LITCs areindependentfrom the IRS and TAS. LITCs represent individuals whose income is below a certain level and who need to resolve tax problems with the IRS. LITCs can represent taxpayers in audits, appeals, and tax collection disputes before the IRS and in court, including the Tax Court. In addition, LITCs can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. LITC services are offered for free or a small fee. For more information or to find an LITC, visit www.taxpayeradvocate.irs.gov/litcorseeIRS Publication 4134, Low Income Taxpayer Clinic List. This publication is also available online atwww.irs.gov/forms-pubsor by calling the IRS toll-free at 800-TAX-FORM (800-829-3676).

Where’s My Refund? Has Your Tax Return Been Flagged for Possible Identity Theft? (2024)

FAQs

What if my tax return is flagged for identity theft? ›

If a tax return is flagged as suspicious, the agency will pull it for more review. Then the IRS will send the taxpayer a letter notifying them of potential ID theft. The suspicious tax return won't be processed until the taxpayer responds to the letter.

How long does it take to get a refund after identity theft? ›

The IRS says that it resolves tax identity theft cases in 120 to 180 days, depending on your circ*mstances. But in many instances, victims of complex tax identity theft have experienced resolution times of more than one year.

How long does it take for the IRS to approve a refund after identity verification? ›

What happens after I successfully verify? We'll process your tax return. It may take up to 9 weeks to receive your refund or credit any overpayment to your account. However, if we find other problems, we'll contact you again and this may delay your refund.

How long does identity theft investigation take with the IRS? ›

A typical case can take about 180 days to resolve, and the IRS is working to reduce that time period. While the identity theft cases are being worked, the IRS also reminds victims that they need to continue to file their tax returns during this period.

What does it mean when your taxes are flagged? ›

While the odds of an audit have been low, the IRS may flag your return for several reasons, tax experts say. Some of the common audit red flags are excessive deductions or credits, unreported income, rounded numbers and more. However, the best protection is thorough records, including receipts and documentation.

Why is my tax return being reviewed to protect me from identity theft? ›

They're trying to crack down ... to make sure you're [the one] actually filing,” said Dan Herron, a certified public accountant and certified financial planner based in San Luis Obispo, California. Sometimes, the system inadvertently catches returns that aren't fraudulent, though.

How do I fix identity theft with the IRS? ›

You may also contact the IRS for specialized assistance at 800-908-4490. These IRS employees are available to answer questions about identity theft and resolve any tax account issues that resulted from identity theft. Review Publication 5027, Identity Theft Information for Taxpayers, for more information.

How can I verify my identity with the IRS right now? ›

To verify:
  1. Go to the IRS application you'd like to access. ...
  2. Sign in to your ID.me account and set up multi-factor authentication (MFA) to further protect your account.
  3. Select Video Call. ...
  4. Select Get Started, accept ID.me's consent to collect personally identifiable information, then select Continue.

How can I verify the IRS received my return? ›

The most convenient way to check on a tax refund is by using the Where's My Refund? tool on IRS.gov. Taxpayers can start checking their refund status within 24 hours after the IRS acknowledges receipt of the taxpayer's e-filed return.

Why is IRS reviewing my return? ›

Why is my return being reviewed? While we accept most tax returns as filed, we select some for examination. The IRS examines some federal tax returns to determine if income, expenses, and credits are reported accurately.

Why is the IRS still holding my refund? ›

Reasons Your Tax Refund Can Be Delayed

Errors such as an incomplete filing status. Missing information. A need for additional review. Possible identity theft or tax fraud.

Will you know if the IRS is investigating you? ›

Signs You May Be Under Investigation

Many times the IRS won't tell you directly that you're under criminal investigation. But there are signs you can watch out for: IRS agents suddenly stop contacting you after requesting information or asking you to pay taxes owed.

Does the IRS send notices about identity theft? ›

If the system finds a suspicious tax return, the IRS reviews the return and sends a letter to the taxpayer letting them know about the potential ID theft. The IRS won't process the suspicious tax return until the taxpayer responds to the letter.

What triggers a 5071C letter? ›

If the IRS suspects that a tax return with your name on it is potentially the result of identity theft, the agency will send you a special letter, called a 5071C Letter. This letter is to notify you that the agency received a tax return with your name and Social Security number that it believes may not be yours.

How do I resolve identity theft to the IRS? ›

If you believe someone may have used your SSN fraudulently, please notify IRS immediately by responding to the name and number printed on the notice or letter. You will need to fill out the IRS Identity Theft Affidavit, Form 14039.

What happens if you get red flagged by IRS? ›

It may not mean that your return will be selected for audit, but an amended tax return red flag generally means someone at the IRS will make sure that the return was done properly.

How common is tax return identity theft? ›

The IRS' Identity Theft Victim Assistance program had 294,138 individual case receipts during fiscal 2023, up from 92,631 in 2019, according to the National Taxpayer Advocate's annual report to Congress released last week. Tax-related identity theft has diminished since the early days of electronic filing.

What is the identity theft flag rule? ›

Are you up on the Red Flags Rule? (Sometimes it's referred to as one of the Fair Credit Reporting Act's Identity Theft Rules and it appears in the Code of Federal Regulations as “Detection, Prevention, and Mitigation of Identity Theft.”) The Red Flags Rule requires many businesses and organizations to implement a ...

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