More than 1M tax returns flagged for potential identity fraud: IRS

More than 1 million tax returns have been flagged for potential identity fraud with more than $6 billion in refunds requiring additional review, according to the IRS. 

An interim report on the 2023 tax filing season that the IRS composed last week and publicly released Tuesday states that the agency identified almost 1.1 million returns that need to have additional review because of identity theft filters, as of March 2. The IRS confirmed 12,617 returns to be fraudulent, preventing $105.3 million in refunds from being distributed. 

The total confirmed to be fraudulent is up about 3,000 from the 9,626 that were confirmed to be fraudulent as of the same time last year. 

The report states that the agency is using 236 filters to identify possible fraud in returns during the 2023 season, up from 168 filters used last year. It states that the filters include criteria based on characteristics from tax returns confirmed to be fraudulent, including income and withholding amounts claimed, filing requirements, age, filing history and prisoner status. 

If a return is identified by a filter that the agency uses, it is held until the IRS is able to confirm the person’s identity. 

The agency announced Tuesday that it is launching a pilot program for a free direct online tax-filing service for the 2024 tax filing season following high interest in a program.