Tax returns MIA for 'desperate' Floridians

ysavchuk@MiamiHerald.comAugust 5, 2013 

When Dinorah Carballosa filed her income tax return electronically in early March, she planned to use her refund of just over $1,500 to repair her car and pay for dental care. Nearly five months later, the 66-year-old widow from Miami hasn't received her money.

"I'm desperate," said Carballosa, who supplements her Social Security income by working part-time in her daughter's drugstore. "I depend on it penny by penny. It might seem that $1,500 is nothing, but to me right now it's a lot."

The only information she's gotten from the Internal Revenue Service: It's "still in process."

Tax preparers say a number of clients who filed their returns on time have been waiting months for refunds this year. Ramped-up identity theft checks have caused a spike in delayed refunds, according to an independent taxpayer advocacy group.

IRS staff cuts and furloughs have also contributed to delays -- and long wait times to get help -- according to the union that represents IRS employees, although the federal tax agency denies budget cuts have impacted service.

In addition, tax season started late this year, after Congress passed a last-minute bill changing a number of tax rules Jan. 1.

The IRS processed 587,000 fewer returns and issued 1.44 million fewer refunds as of May 10, compared with the same time last year, although it's unclear to what extent delays account for the drop.

Nicolas Villageliu, Carballosa's accountant, said more than 20 of his clients have faced unusually long delays getting refunds. IRS representatives told one client there was no problem with his return and they couldn't explain the hold-up, he said.

"The system is not working right," said Villageliu, whose practice is based in Miami. "They're having hardships, some people who are sick or a member of their family needs help. It hurts the economy, too."

Gabriel Rodriguez, an accountant at Advantage Income Tax Service in Miami, estimates 1,000 of the approximately 6,000 clients his firm assisted this year have waited three to six months for a refund, largely due to identity theft concerns. Some clients with identity theft cases are still waiting for refunds from last year, he said.

"It sucks for the individual taxpayer, because they count on this money for their life," said Rodriguez, whose company primarily serves low-income clients. The delays have also hurt the firm, which draws most of its fees from the refund checks, he said.

Bottlenecks extend to higher income brackets, as well.

"We've been experiencing tremendous delays," said Scott Berger, tax principal at Kaufman Rossin & Co, one of South Florida's largest accounting firms. He said at least a dozen clients have been waiting up to four months for refunds.

"I can't tell you if it's the identity theft, I can't tell you

if it's the IRS furloughs. Every time I try to reach the IRS there's such a backlog on the phone," he said. "There's a tremendous slam throughout the whole system."

The holdups have affected business, Berger said.

"It's created additional work for our clients that we may or may not get paid for," he said. "It also adds to credibility issues, because now they're asking, 'Is it something that you did? Did you make mistakes?'"

The IRS sharply intensified efforts to fight identity theft and refund fraud this year, including substantially increasing the number and types of filters used to catch potential fraud before refunds are issued. The agency now uses dozens of identity theft screens to detect false returns. The IRS doesn't disclose what it looks for, but red flags include being a first-time filer, an unusual bump in the refund amount and an unexpected W-2 form, according to Dustin Stamper, director in Grant Thornton's national tax office in Washington, D.C.

These new filters "ensnare far too many legitimate filers," according to the National Taxpayer Advocate, an independent branch of the IRS. In its report to Congress in June, the group raised "serious concerns about the currency and effectiveness" of the filters. Using these screens, the IRS marked 356 percent more returns as "unpostable" -- meaning a delay of about six weeks in processing -- through May 9, as compared to the same period last year, according to the report. Nearly 90 percent of these flagged returns were eventually found to be legitimate.

The agency suspended or rejected 4.6 million "suspicious" returns in 2013, said IRS Principal Deputy Commissioner Danny Werfel, speaking at a nationwide tax forum Tuesday in Dallas.

In 2012, the agency prevented $20 billion in refunds from going to fraudulent returns, compared with $14 billion in 2011.

Once identity theft is detected, the IRS has set a benchmark of six months for resolving cases, and it more than doubled the number of staff dedicated to identity theft issues to 3,000 between 2011 and 2012.

Yet the agency still takes six months to a year to resolve most cases, based on data from fiscal year 2012, which is "simply not acceptable for the hundreds of thousands of victims, and almost guarantees that these victims will be caught up in IRS processes for a second filing season," according to the National Taxpayer Advocate's report.

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