January 19, 2017


The Internal Revenue Service (IRS) has been warning taxpayers for weeks now about tax refund delays in 2017 and the Identity Theft Resource Center (ITRC) thinks this is good news. Here’s why: As the IRS continues to beef up its resources to tackle identity theft in the tax system and tax refund fraud, it needs the extra time to be sure any fraudulent refunds are not issued in the first place.

Tax return fraud has been an ongoing concern of the IRS and the ITRC for the past several years now. The things that make filing your tax return and receiving your refund as hassle-free as possible are the very aspects that make tax return fraud possible, namely electronic filing and a variety of payment methods, such as sending the refunds to a prepaid debit card.

To their utmost credit, the IRS has been doing its part, working diligently behind-the-scenes on changes to combat identity theft and fraud. And not only that but the IRS has a huge annual job in processing individual tax returns, which doesn’t even include the millions of business returns it has to process as well. The agency expects to process about 153 million individual returns in 2017 and about 70 percent of taxpayers will receive a refund. In fact, Treasury issued 111 million refunds in 2016 and the average refund was well over $2,800. According to the IRS, most taxpayers will get their refund in 21 days or less but it is warning that some legitimate returns may see delays longer than that. The reason? So it can use its vast array of internal detectors, screens, and filters to prevent the bad money from going out the door, to begin with.

This year, the Protecting Americans from Tax Hikes (PATH) Act is mandating the IRS to hold refunds on tax returns claiming the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) until mid-February. The change helps ensure taxpayers receive the refund they are owed by giving the IRS more time to help detect and prevent tax fraud. These two tax credits infuse hundreds of millions of dollars into the San Diego County economy each year.

Although this unexpected (but intentional) delay is a good thing, it has to be frustrating for some individuals to face, especially when it hits them and their families the hardest, but unfortunately, those two particular deductions are easy to falsify and are therefore common tactics for criminals committing fraud with your tax return. Knowing this was on the horizon, IRS Commissioner, John Koskinen, has been repeatedly warning taxpayers to plan ahead in 2017 and better prepare for these changes (to the best of their ability) in both tax security and how the IRS will process returns. The ITRC believes this is sage wisdom.

Fortunately, 61 percent of people surveyed in a (LexisNexis survey about taxes) stated they were very supportive of putting procedures in place to reduce the number of fraudulent state tax refunds.  Ultimately, the reason behind this is to protect the taxpayer from even greater harm. An ounce of prevention may very well be worth the pound of cure here. The few extra weeks of fact checking may ultimately prevent many months of delay down the road. 

Since 2010, the Federal Trade Commission has been reporting that tax identity theft complaints have topped their list of consumer complaints. Additionally, this past October, the ITRC released its Identity Theft: The Aftermath 2016 report that addressed the many issues faced by victims of tax return fraud and further explored the impact of the crime on victims’ lives. The results showed that slightly less than half of the respondents did not receive their refund in time. Of those individuals who didn’t receive their refunds in time, many reported borrowing money from friends, family, or their church, signing up for government assistance programs like food stamps, or taking out a loan to make ends meet.  Seeing the hardships faced by an individual and in turn, their friends, family and even the state, is a constant reminder that something needs to be done to help circumvent the problem, which is why the ITRC believes the delays are a good thing and a step in the right direction.  

All of us, from large government agencies down to individual taxpayers, play a significant role in preventing tax refund fraud. Avoiding scams and fraud attempts is only one part of the prevention equation. It means staying vigilant about where your personal data ends up, monitoring your credit report routinely for signs of suspicious activity, and filing your return as early as possible to beat a thief to it. It also means allowing the IRS the timing needed to strike a balance between quick refunds and not issuing fraudulent ones, to begin with.