The IRS has flagged over 1 million 2022 tax returns for additional review over potential identity fraud.

The IRS Flags Over 1 Million Tax Returns for Possible Identity Fraud

  • June 6, 2023

According to a recent report, the Internal Revenue Service (IRS) has flagged over 1 million 2022 tax returns for additional review over potential identity fraud.

The Treasury Inspector General for Tax Administration’s interim results of the 2023 filing season, which they released on May 10, cited 1.1 million identified as of March 2 that warranted a closer look.

The IRS stated that thus far, they have confirmed that 12,617 of the tax returns were fraudulent, and they prevented the distribution of refunds totaling $105.3 million.

This tax season alone is seeing a huge jump in identity fraud

During the last tax year, the IRS only identified 9,626 as confirmed fraudulent returns, with the 2023 filing period already seeing a jump of roughly 3,000 illegal returns.

According to the study, the agency would employ 236 different filters during the tax filing season of 2023, which is an increase from the 168 filters that were used during the tax filing season of 2022.

The Treasury Inspector General’s office went on to explain that the filters consist of reported income and withholding amounts, filing requirements, age, filing history, and prison status. These characteristics are derived from tax returns that have been shown to be false.

When the IRS filters detect possible identity fraud, returns are not processed until verified

If an agency filter flags a tax return, the IRS will not process it until the taxpayer’s identification has been verified.

The IRS anticipates collecting 167 million individual income tax returns in the year 2023. As of March 3, 2023, the IRS had received 54.9 million tax returns, of which 53.6 million (or 97.5 percent) were filed online and the IRS has distributed $127.3 billion in tax money. Unfortunately, identity fraud with tax returns has been steadily increasing.

Increased IRS enforcement activities at all levels

According to recent expert testimony before the Senate, the IRS’s increased enforcement activities are likely to impact small and midsize businesses.

Chris Edwards of the CATO Institute testified before the Senate Finance Committee on May 16, explaining that the Biden administration’s promise that there won’t be more tax audits for companies and families making less than $400,000 per year applies to “total positive” income, which means that there are no losses.

The committee heard testimony on May 16 about the impact of the additional $80 billion being allocated to the IRS as part of the Inflation Reduction Act.

Sen. Chuck Grassley (R-Iowa) asked Edwards about the administration’s promise during his hearing. Edwards confirmed that the IRS plan was to assess income without accounting for losses and that the increased audits would likely impact “mainly small to midsize businesses, who actually may have [adjusted gross income] under 400,000.”

Noted that the IRS gets it wrong almost 50% of the time when audits are enforced

Edwards also pointed to the fact that, on many occasions, when audits lead to enforcement, the IRS is not correct in its assertion: “If you look at tax court cases over the last five years, the IRS gets it wrong about half the time,” he said.

“The IRS only got 48 percent of the dollars that it demanded.”

We're here to help you properly file your taxes without the fear of identity fraud – and we're here to solve any tax problems you may have

At Tax Problem Solver, we know all the ins and outs of proper tax reporting. If you have tax problems of any kind, we're here to help! We'll get things sorted out for you, and we'll make sure your tax situation is solved effectively, with your best interests in mind (not the IRS's).

Contact me by one of the methods below in the blue box, or you can email me at Larry@TaxProblemSolver.com and we can dive into your specific issues and solve them. You can also click here to book a free consultation with me or a member of my team.

Would You Like to Find Out What Your
Next Best Steps Should Be?

Choose one of the 3 FREE contact methods that is easiest for you.

Schedule a Call with Us

Click the calendar button below to view our appointment calendar, and choose a day & time, and we’ll call you then.

We look forward to your free consult!

Call Us Now

Click the phone button below to either "click to call" or direct dial a number to speak with us right now. 

We look forward to speaking with you!

9-Secrets You Need to Know

When the IRS is after you, you need to be informed. What you say to the IRS can be used against you.
Get My 9 Secrets email series now. I'll also add you to my newsletter.

About the Author Larry Heinkel J.D. LL.M

Larry Heinkel is a tax and bankruptcy attorney with more than 38 years experience helping businesses and individuals, solve their state and federal tax problems. Mr. Heinkel has been extremely successful in representing his clients before IRS and DOR, and is known throughout Florida as an expert in tax problem resolution.

Leave a Comment: