The crime itself takes minutes. Someone gets hold of a Social Security number, files a tax return in the victim’s name, and redirects the refund to their own account.

By the time the actual taxpayer files and discovers what happened, the money is already gone. What comes next is what the IRS‘s own watchdog has spent three years trying to fix and still cannot explain away.

A new report to Congress released on June 24 by the National Taxpayer Advocate found that more than 500,000 Americans are currently waiting for the IRS to resolve their identity theft cases. The average wait is 20 months. The agency’s own target is 120 days.

The word Erin Collins, the National Taxpayer Advocate, used to describe that gap is not a soft one.

What the National Taxpayer Advocate found on IRS identity theft delays in 2026

Collins has flagged identity theft processing as a serious IRS failure in each of her last three annual reports. Each time, she has asked the agency to address it. The backlog has grown anyway.

In fiscal year 2023, the IRS had roughly 484,000 unresolved identity theft cases and took about 19 months to work through them. By the 2026 filing season, the case inventory had crossed 500,000 and the average wait had crept to 20 months.

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“IRS delays in resolving identity theft victim assistance cases are unconscionable,” Collins wrote in the report.

The IRS did not immediately return a request for comment from CNBC on the report.

IRS staffing cuts, DOGE deepened identity theft backlog

The IRS entered the 2026 filing season with roughly 74,000 employees, a 27% drop from the 102,000 it had a year earlier following workforce reductions tied to the Department of Government Efficiency.

Those cuts left the agency facing significant challenges across departments, PBS NewsHour reported. TheStreet also covered how the reductions hit processing departments at a critical time.

The identity theft unit was also caught in a staffing trade-off. The IRS redirected some of its case resolution workers to answer general phone lines, which helped call center metrics but left the identity theft backlog without enough people to tackle it.

The Taxpayer Protection Program phone line, which victims call to authenticate their identities before their cases can move forward, answered only 19% of the calls it received during the 2026 filing season. The average hold time was 20 minutes.

That meant victims trying to get their cases moving were often unable to reach anyone. Every call that went unanswered was a case that did not advance.

For many Americans, a tax refund is not found money.

Moon/Getty Images

Who IRS identity theft delays hurt most and what they actually cost

For many Americans, a tax refund is not found money. It represents a payment they have been deferring since January: overdue rent, medical bills sitting on the kitchen table, car repairs that have been put off.

The NTA report notes that two-thirds of identity theft victims are low-income taxpayers who depend on their refunds to cover basic living costs.

“For many low- and middle-income taxpayers, waiting nearly two years for a refund is not merely an inconvenience,” Collins wrote.

The delays create problems beyond the missing cash. While an identity theft case is open at the IRS, the agency will not release a taxpayer’s transcript to a third party. That means victims cannot submit the income verification documents most mortgage lenders require.

Someone who had their tax identity stolen in early 2025 could be locked out of the housing market until late 2026 or beyond, not because of anything they did, but because the IRS has not finished paperwork that was supposed to take four months.

Families claiming refundable credits like the Earned Income Tax Credit are particularly exposed. These taxpayers often need their refunds quickly, and they tend to have the least financial cushion to absorb a wait of nearly two years.

What IRS identity theft victims must navigate while waiting for their tax refund

The IRS runs a dedicated Identity Theft Victim Assistance unit to handle these cases. The process is paper-heavy.

A victim typically has to submit documentation to establish their identity, then wait for the IRS to validate it, then wait again for the underlying refund to be released. Each step in that sequence can stall independently, and when one does, the entire case can sit without movement for months.

The process was designed to protect legitimate taxpayers from fraud, and that protection is necessary. But as TheStreet has covered, the infrastructure around tax refund delivery has faced mounting pressure from staffing reductions and policy changes that pushed more complexity onto an already strained system.

Collins has made reducing identity theft wait times one of the National Taxpayer Advocate’s priority recommendations to the IRS for fiscal year 2027. The same recommendation appeared in her fiscal year 2025 and 2026 reports. Three years of the same ask, and more than half a million people are still in the queue.

Related: IRS raises 401(k) limits but most workers lag behind