Millions of tax refunds and stimulus check payments were delayed after the Internal Revenue Service (IRS) flagged many potential identity theft transactions that affected legitimate applications as well.
Americans looking to utilize their tax refunds will have to first verify their identity, which has been seen as a difficult and complicated process. The agency is rattled with clogged phone lines and unavailable online authentication processes.
One resident, 42-year-old Jeff Lavigne, wanted to use his tax refund money to finance his medical bills. However, he was unable to get his nearly $2,700 since mid-March. He is suffering from chronic back pain, which makes it challenging to work for extended periods.
Delayed Payments
Lavigne is a former restaurant manager who no longer has a full-time job or health insurance to fall back on. The tax refund money would have given him some leeway amid the pandemic and given him the chance to seek professional assistance. He has been planning out the help he would need, saying he was taking things one step at a time, Lavigne said, CNBC reported.
It remains unclear how many residents have had their tax refunds affected by the mass delay, but it has since become a growing concern for a majority of Americans. Last year, 5.2 million tax refunds were flagged by the IRS, which was a 50% increase to the same number from 2019, the Taxpayer Advocate Service said.
The IRS delayed the payments to avoid having fraudulent applications getting through their system and getting money belonging to someone else, but has been criticized by the slowness of its response, reported ABC 7. However, the Taxpayer Advocate Service found out 63% of the flagged transactions were legitimate.
For affected residents, the agency will be giving the money, with interest, but at a later time, a fear many have that could stretch for months. Nearly 18% of identity-flagged refunds took more than 120 days to reach their recipients, the Taxpayer Advocate Service said. It also said that one of the top 10 most problematic issues that taxpayers faced in 2020 was tax refund delays.
It took nearly a year for Dan Herron's, a certified financial planner and accountant, tax refund in 2019 to come, Eminetra reported.
Identity Theft
The process of getting the tax refund was arduous and challenging, Herron said. He expressed his desire for the IRS to streamline its process to allow residents to get their payments much easier and faster.
Experts believe the delay was made even more prominent because of the coronavirus pandemic. The IRS became short-staffed after temporarily suspending some of its in-person operations, Executive Director and Founder of the Center for Taxpayer Rights, Nina Olson, said.
However, taxpayer advocates said the idea of increasing security to fend off criminals from taking other people's money is an admirable thing to do. Since 2005, identity theft has seen a dramatic increase in the number of cases, with Olson arguing thieves were getting smarter.
In 2019, the IRS was able to protect $3.5 billion in revenue from being stolen, about $2.5 billion of which was due to identity theft filters. The agency also reassured 98% of tax returns were not hampered by the process.
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