How the IRS Processes Identity Theft Cases

Overview

Identity-theft-related tax fraud happens when someone uses another person’s personal data to file a tax return, claim a refund, or otherwise manipulate a taxpayer’s IRS account. The IRS has a structured process to detect, investigate, and resolve these cases, involving identity verification, case tracking, and remediation steps that can take months. In my practice advising clients on tax identity issues, prompt action and clear documentation almost always speed resolution.

This article explains how the IRS processes identity theft cases, the victim’s role, realistic timelines, and practical steps to protect your tax account.

How the IRS typically detects identity theft

The IRS uses a mix of automated filters, cross‑checks, and multiple reporting channels to flag returns and accounts for possible identity theft. Common triggers include:

• Duplicate Social Security numbers (SSNs) used on more than one return.
• Returns with inconsistent wage or withholding data compared with employer filings (W‑2/1099 match failures).
• Unusual refund claims or changes to mailing addresses/bank direct‑deposit information.
• Identity verification failures when a taxpayer is asked to confirm identity (see IRS verification letters).

Detection may come from third‑party reporting (employers, financial institutions), taxpayer contact, or IRS analytics. When a return or account is flagged, the IRS creates a case file and assigns a unit or specialist to proceed.

Sources: IRS Identity Theft Central (IRS.gov), FTC (IdentityTheft.gov).

Step-by-step: how the IRS processes an identity theft case

Below are the core steps the IRS follows after identifying suspected identity theft. Timelines vary by complexity and backlog, but these steps reflect current IRS procedures as of 2025.

1. Initial review and case creation

• The IRS reviews the suspicious return or account activity to confirm whether it appears fraudulent. This includes comparing submitted return data with employer and payer information already reported to the IRS.
• If fraud is suspected, the IRS places an indicator on the taxpayer’s account to prevent automated posting of additional suspect activity.

1. Identity verification

• The IRS may issue an identity verification letter (for example, letter types used to request identity confirmation) or request the victim complete Form 14039, Identity Theft Affidavit. Form 14039 remains the primary affidavit used when an individual’s SSN has been misused on a tax return (see IRS Identity Theft Central).
• The agency may also enroll an affected taxpayer in the Identity Protection PIN (IP PIN) program to prevent future fraudulent filings using that SSN. The IP PIN is a six‑digit number the IRS uses to verify a filer’s identity; taxpayers can apply for it if they qualify or if they are confirmed victims.

1. Victim notification and instructions

• The IRS notifies the taxpayer by U.S. mail. For identity theft matters, the IRS generally does not initiate contact by email or telephone — any unsolicited electronic requests are likely scams. Always verify notices via IRS.gov or your tax professional.
• Notifications explain what the IRS found, what documents to provide, and next steps for the taxpayer.

1. Evidence collection and documentation

• Victims are asked to provide documentation that supports their claim (a copy of a police report, a completed Form 14039 when required, copies of driver’s license or passport, or proof of filing such as tax transcripts).
• Maintain a record of all communications with the IRS: date, representative name/ID, and a summary of what was discussed.

1. Case resolution and account correction

• The IRS researches the fraudulent return, works to remove the fraud indicator, and corrects the taxpayer’s account so legitimate returns and payments post correctly.
• If a fraudulent refund was issued, the IRS works to recover it from the imposter; if the legitimate taxpayer is owed a refund, the IRS will determine eligibility and issue the refund once the case is resolved.

1. Post‑resolution safeguards

• After the case closes, the IRS may recommend or assign protective measures such as an IP PIN or continued monitoring of the account. The agency also provides guidance on preventing future identity theft.

Timelines — what to expect

Every case is different. A typical identity-theft case can take anywhere from several months to more than a year, depending on:

• Complexity of the fraud (single return vs. multiple years)
• Amount of documentation required
• Whether refunds were diverted or applied to other liabilities
• IRS workload and staffing at the time of the case

Example timeline (typical range):

Note: These are general ranges. Some cases resolve faster; some take longer when multiple agencies or criminal investigations are involved.

Actions victims must take (checklist)

• Respond immediately to any IRS notice and follow the instructions exactly.
• If instructed, file Form 14039, Identity Theft Affidavit (see IRS Identity Theft Central).
• Create an IdentityTheft.gov report with the FTC and follow its recovery plan; keep a copy of the FTC report and any police reports.
• Consider placing a fraud alert or credit freeze with the three major credit bureaus.
• Enroll in the IP PIN program if eligible or if the IRS issues a PIN to you.
• Keep copies of all documents and notes of IRS contacts; escalate to the Taxpayer Advocate Service if your case remains unresolved beyond a reasonable time (see IRS.gov/advocate).

Sources: IRS Identity Theft Central; FTC IdentityTheft.gov; CFPB guidance on identity theft recovery.

Practical tips from experience

In my work with clients, the following tactics reduce delays and improve outcomes:

• File early: Submitting your tax return early in the season reduces the chance an imposter will file before you.
• Use an IP PIN when eligible: An IP PIN prevents most fraudulent electronic filings using your SSN.
• Respond by certified mail (if sending original docs)—and always keep copies.
• Provide clear, complete documentation the first time; partial responses often trigger follow‑up requests that extend the timeline.
• Work with a qualified tax professional if the case is complex; they can help track the case and communicate with IRS specialists.

Common misconceptions

• The IRS will never email you to resolve an identity-theft claim; official communications come by postal mail for case confirmation (verify via IRS.gov).
• Receiving an identity-theft letter does not mean you will lose your refund — if you are the legitimate filer and you supply the required documentation, the IRS will restore your account and issue any eligible refund.
• Identity theft is not only ‘‘big dollar’’ fraud—people at any income level can be targeted.

When to get extra help

Consider professional help (tax attorney, enrolled agent, or CPA experienced with identity theft) if:

• The IRS requires extensive documentation for multiple years.
• You suspect criminal activity beyond routine tax fraud.
• You experience identity theft impacting credit, benefits, or business tax accounts.

If you are not getting timely action from the IRS, the Taxpayer Advocate Service is an independent organization within the IRS that helps taxpayers who are experiencing economic harm or significant delays.

Related resources (internal links)

• For step‑by‑step guidance on responding to official mail from the IRS, see Responding to Identity Theft Letters from the IRS: https://finhelp.io/glossary/responding-to-identity-theft-letters-from-the-irs/
• For details about the protective PIN the IRS issues, see IRS Identity Theft Protection PIN: https://finhelp.io/glossary/irs-identity-theft-protection-pin/
• For practical refund recovery timelines and tips, see Recovering Identity-Theft-Related Refunds: Timeline and Tips: https://finhelp.io/glossary/recovering-identity-theft-related-refunds-timeline-and-tips/

Sources and authoritative links

• IRS — Identity Theft Central: https://www.irs.gov/identity-theft-central
• IRS — Form 14039, Identity Theft Affidavit: https://www.irs.gov/forms-pubs/about-form-14039
• Federal Trade Commission — IdentityTheft.gov: https://www.identitytheft.gov
• Consumer Financial Protection Bureau — Identity theft guidance: https://www.consumerfinance.gov/

Professional disclaimer

This article is educational and does not replace personalized tax or legal advice. In my practice as a financial educator and advisor, I recommend contacting a qualified tax professional or the IRS directly when you are dealing with identity-theft-related tax issues.