IRS Identity Theft Filters Are Getting Stronger. That’s Good News, But It May Also Mean More Refund Delays

Tax-related identity theft remains one of the most frustrating and disruptive issues taxpayers can face. It often begins quietly, when someone uses another person’s Social Security number or Individual Taxpayer Identification Number to file a fraudulent tax return and claim a refund. For the victim, the first sign may be a rejected e-filed return, an unexpected IRS notice, or a refund that simply does not arrive.

A recent report from the Treasury Inspector General for Tax Administration (TIGTA) found that the IRS selected approximately 7.5 million tax returns through its identity theft filters during 2024 and 2025. The IRS uses these filters to identify returns that show signs of possible fraud before refunds are issued.

That’s an important improvement in fraud prevention. But for legitimate taxpayers whose returns are caught in the filter, it can also mean delays, extra verification steps, and added stress during tax season.

How IRS Identity Theft Filters Work

The IRS uses a combination of automated filters, fraud analytics, and manual review procedures to identify potentially fraudulent returns. These filters look for patterns that may indicate identity theft, such as suspicious income reporting, unusual filing behavior, mismatched taxpayer information, or indicators associated with known fraud schemes.

When a return is flagged, the IRS generally prevents it from posting to the taxpayer’s account and holds the refund until the taxpayer’s identity can be authenticated. In other words, the system is designed to stop the money from going out before the IRS confirms that the return is legitimate.

According to the TIGTA report, the IRS is also refining its filters to reduce the number of legitimate returns selected unnecessarily. In processing year 2023, approximately 55% of selected returns were ultimately legitimate. In 2024, that figure improved slightly to 52%.

That improvement matters, but it also shows how difficult the balancing act is. The IRS has to stop fraudulent refunds without placing too much burden on honest taxpayers.

The Bigger Problem: Delays for Legitimate Taxpayers

Even when the IRS correctly identifies suspicious activity, the resolution process can be slow. The National Taxpayer Advocate reported that, during the 2025 filing season, the IRS suspended more than 13 million returns for additional review, causing refund delays for many affected taxpayers. The Advocate also noted that about 2.1 million returns were flagged by IRS filters as potential identity theft cases requiring taxpayers to authenticate their identities.

There are two different situations taxpayers may face. In one, the IRS flags a return as suspicious and asks the taxpayer to verify their identity before releasing the refund. In the other, a fraudulent return has already been filed using the taxpayer’s name and Social Security number, and the legitimate taxpayer becomes an identity theft victim whose case must be handled by the IRS Identity Theft Victim Assistance unit.

The second situation can be especially painful. The National Taxpayer Advocate reported that, as of the end of the 2025 filing season, the IRS had about 387,000 identity theft victim assistance cases in inventory, with cases taking an average of about 20 months to resolve.

That means some taxpayers may wait well over a year for refunds they are legally entitled to receive.

Why Fraud Is Hard to Stop Before Refunds Go Out

One of the IRS’s biggest challenges is timing. Many taxpayers file early in the season, but the IRS does not always have all third-party information returns available when those returns are filed.

For example, most Forms 1099 and W-2G filed electronically are due to the IRS by March 31, 2026, while Form 1099-NEC is due earlier.

That timing gap creates a fraud detection problem. If a taxpayer files in February claiming income, withholding, or credits tied to information the IRS has not yet received, the agency may not be able to fully match the return before issuing a refund.

The TIGTA report noted that, during the 2024 filing season, the IRS did not yet have information returns available for a large share of returns reporting Form 1099-R retirement income and Form W-2G gambling winnings. TIGTA estimated that accelerating filing deadlines for certain information returns could potentially help protect an additional $944 million in revenue over fiscal years 2025 through 2034.

The IRS Is Sharing More Fraud Data

The IRS is not working alone. It partners with state tax agencies, financial institutions, and tax industry professionals through the Identity Theft Tax Refund Fraud Information Sharing and Analysis Center, commonly referred to as ISAC.

These partnerships allow government agencies and private-sector participants to share fraud alerts, suspicious filing patterns, and emerging scam information more quickly. The TIGTA report found that these partnerships have helped protect nearly $278 million in revenue since 2017.

That kind of coordination is becoming increasingly important as fraud schemes become more sophisticated.

The Best Preventive Tool: An IRS IP PIN

One of the strongest steps taxpayers can take is to obtain an IRS Identity Protection PIN, commonly called an IP PIN.

An IP PIN is a six-digit number known only to the taxpayer and the IRS. It helps prevent someone else from filing a federal tax return using the taxpayer’s Social Security number or ITIN. The IRS states that anyone with an SSN or ITIN who can verify their identity is eligible to request one, and parents or legal guardians can also request IP PINs for dependents.

The Taxpayer Advocate Service has emphasized that an IP PIN can prevent a much larger tax problem. If a taxpayer is enrolled in the IP PIN program, the IRS will reject an e-filed return that does not include the correct IP PIN. Paper returns without the IP PIN are subject to additional scrutiny, which may delay processing.

For many taxpayers, especially those who have previously experienced identity theft, have dependents, or want added protection, an IP PIN is worth serious consideration.

What Taxpayers Should Do Now

Taxpayers can reduce their risk by taking a few practical steps:

1. Request an IP PIN from the IRS. This is one of the most effective ways to prevent someone else from filing using your identity.
2. File as early as reasonably possible. Filing earlier can reduce the window of opportunity for a fraudulent return to be filed first.
3. Protect personal information. Be careful with Social Security numbers, IRS notices, W-2s, 1099s, and tax documents.
4. Watch for IRS notices. If the IRS asks you to verify your identity, respond promptly using the instructions in the notice.
5. Be alert for scams. The IRS generally initiates contact by mail, not by text, social media message, or threatening phone call.
6. Work with a trusted tax professional. A qualified tax team can help identify red flags, respond to IRS notices, and guide you through the resolution process if something goes wrong.

Final Thoughts

The IRS is getting better at detecting identity theft before fraudulent refunds are issued. That’s a positive development for the tax system as a whole. But stronger fraud detection also means more returns may be stopped for review, including some legitimate returns.

For taxpayers, the key takeaway is simple: prevention is far easier than resolution. An IP PIN, careful document handling, and prompt attention to IRS notices can go a long way toward reducing the risk of tax-related identity theft and avoiding a prolonged refund delay.

At The Phillips Group, we help dentists, physicians, and healthcare professionals navigate IRS notices, filing issues, and tax-season surprises with clarity and confidence. If you receive an identity verification notice, experience a rejected e-file, or suspect your tax information may have been compromised, our team can help you understand the next steps and work toward a resolution as efficiently as possible.

To learn more about our proactive tax and advisory services, visit us online at www.phillipsgrouptax.com or email us at hello@phillipsgrouptax.com.