The IRS stopped $7 billion in fraudulent refunds in calendar years 2024 and 2025, and it could prevent more fraud if it had earlier access to key information returns, according to an audit report from the Treasury Inspector General for Tax Administration (TIGTA).
In the report dated May 13, TIGTA said the IRS selected about 7.5 million individual tax returns through its identity theft filters during the two-year period. Those filters, which screen returns before refunds are issued, use characteristics of known and emerging fraud schemes to flag suspicious filings.
TIGTA noted that the IRS “continually evaluates identity theft filters to improve detection and prevention,” adjusting criteria and thresholds as new risks emerge.
An unintended consequence of changing identity filters is that they identify more legitimate tax returns for potential identity theft, the report said. And resolution of identity theft cases takes an “unacceptably long” time, with an average wait time of nearly two years, National Taxpayer Advocate Erin Collins said in her report to Congress on the 2025 tax season.
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