Identity theft continues to be one of the biggest threats facing taxpayers, and when it involves your tax return, it can delay refunds, create frustration, and require significant time to resolve.
The good news is that the IRS continues to improve its systems to detect fraudulent tax returns before refunds are issued, helping protect millions of taxpayers each year.
A recent report from the Treasury Inspector General for Tax Administration (TIGTA) highlights the progress the IRS has made in identifying potential tax-related identity theft while also working to reduce unnecessary delays for legitimate taxpayers.
Here’s what you should know and why it matters.
The IRS Is Detecting More Potential Identity Theft
The IRS uses sophisticated filters to identify tax returns that show signs of possible identity theft before issuing refunds.
During the 2024 and 2025 filing seasons, the IRS reviewed approximately 7.5 million tax returns through its identity theft screening process. These filters analyze characteristics commonly associated with fraudulent tax returns and temporarily hold refunds until the IRS can verify that the return is legitimate.
This extra layer of protection helps prevent criminals from receiving refunds using stolen Social Security numbers or other personal information.
The IRS Is Reducing Delays for Legitimate Taxpayers
One challenge the IRS faces is balancing fraud prevention with providing timely refunds to honest taxpayers.
To improve that balance, the IRS continually updates its identity theft filters based on emerging fraud trends. As a result, the number of legitimate tax returns being flagged has gradually declined.
The report found that:
- The percentage of legitimate returns selected by identity theft filters decreased from 55% in 2023 to 52% in 2024.
- The IRS resolved approximately 955,000 flagged returns without requiring taxpayers to take any action.
- When taxpayer verification was required, returns were processed in an average of 13 days after identity verification was completed.
While no one wants additional scrutiny of their tax return, these improvements help reduce unnecessary delays while still protecting taxpayers from fraud.
Identity Theft Remains a Serious Concern
Tax-related identity theft occurs when someone uses another person’s Social Security number or other identifying information to file a fraudulent tax return and claim a refund.
If this happens, the legitimate taxpayer may discover fraud only after attempting to file their own tax return and receiving notice that a return has already been filed under their Social Security number.
According to the report, the IRS prevented:
- More than $9.2 million in refunds tied to confirmed identity theft during fiscal year 2024.
- An additional $49.3 million in refunds associated with potential identity theft identified through external fraud alerts.
These efforts help protect both taxpayers and government funds from fraudulent refund claims.
Partnerships Help Stop Tax Fraud
The IRS doesn’t work alone in combating identity theft.
It collaborates with state tax agencies, financial institutions, and members of the tax preparation industry through the Information Sharing and Analysis Center (ISAC). These partnerships allow organizations to share fraud alerts and emerging scam patterns in real time.
Since the program began in 2017, the IRS estimates these partnerships have helped protect nearly $278 million in revenue by identifying fraudulent refund claims before money was issued.
Why Earlier Tax Reporting Could Make a Difference
One challenge the IRS continues to face is that it often receives taxpayer information after many refunds have already been issued.
For example, during the 2024 filing season:
- Approximately 75% of tax returns reporting retirement distributions on Form 1099-R were filed before the IRS had received those information returns.
- Approximately 77% of returns reporting gambling winnings on Form W-2G were filed before the IRS received that information.
Without complete information available during return processing, it becomes more difficult for the IRS to verify the accuracy of refund claims before issuing refunds.
The Treasury Inspector General recommended moving up the filing deadlines for certain information returns. Earlier deadlines would give the IRS more complete data during tax season.
The IRS agreed that earlier reporting would strengthen fraud detection but noted that Congress would need to change the current filing deadlines through legislation before those changes could take effect.
What You Can Do to Protect Yourself
Although the IRS continues to improve its fraud detection systems, protecting your personal information is still one of the best defenses against tax-related identity theft.
Some simple steps include:
- File your tax return as early as possible.
- Protect your Social Security number and other sensitive information.
- Be cautious of phishing emails, text messages, and phone calls claiming to be from the IRS.
- Create an online IRS account to monitor your tax information.
- Consider obtaining an IRS Identity Protection PIN (IP PIN), especially if you’ve previously experienced identity theft or want additional protection.
Staying Vigilant Helps Protect Your Refund
The IRS continues to make meaningful improvements in identifying fraudulent tax returns while reducing unnecessary burdens on legitimate taxpayers. Although no system can eliminate fraud entirely, stronger detection tools and increased collaboration are helping protect millions of taxpayers each year.
If you receive unexpected IRS correspondence regarding your tax return, don’t ignore it. Responding promptly can help resolve issues more quickly and protect your tax account.
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