The IRS has been known to occasionally send out letters requesting verification of a taxpayer's identity before releasing refunds. Before 2021, the receipt of such letters was out of the ordinary.
Roughly between April 2021- January 2022, for many taxpayers, these letters became the rule, not the exception. From my experience, around 70% of taxpayers whose tax returns claimed the 2020 recovery rebate credit received such letters. First time filers and those claiming the child tax credit were also subject to this great inconvenience. First time filers claiming the recovery rebate credit had almost a 100% chance of being flagged for ID verification.
Even worse, many taxpayers never received these letters, whose returns had actually been flagged without any notification.
Verifying online proved impossible for many taxpayers, due to the convoluted process of setting up an online IRS account.
Calling the IRS is another option, however:
While in prior years, calling the IRS ID verification line only required 1-2 hours of patience on hold, in 2021 (as well as now) it was almost impossible to get through to an agent. The agents were overwhelmed by the amount of callers.
Many times, even when finally getting through to an agent, taxpayers were told that their ID could not be verified, and they have to fax or mail in copies of their ID and social security cards. This caused another 5-8 month processing delay.
It's very commendable that the IRS is concerned about ID verification, especially in the light of widespread COVID-19 relief fraud. However, this mass flagging of honestly filed returns indicates a major miscalculation of the designers of the flawed 2021 ID verification-flagging algorithm. Additionally, there is no mechanism in place to allow taxpayers to quickly verify their identity.
Thankfully, it seems like this algorithm has been adjusted back to normal, pre-2021 levels, as of January 2022. Very few of the above type of returns are being flagged. Additionally, the new ID.me system makes opening an online account a bit easier, with the option of a live videocall with an agent, for those running into trouble opening an account.
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