850 days of ‘the grossest incompetence:’ How the IRS botched a case of identity theft

8/15/2014

INDIANOLA, Iowa — Jason Dinesen smiled politely and shook his head when asked about a new bill in the U.S. Senate that aims to improve how the IRS handles cases of identity theft by assigning one agent to deal with each individual case.

“I’m skeptical about the bill. Having an assigned contact person is a good idea in theory, but it’s not going to do much unless there are some other major changes at the IRS,” Dinesen told Iowa Watchdog.

Dinesen, an accountant, knows firsthand about what changes need to be made. One of his clients had a refund delayed by identity theft, and it took Dinesen 850 days to resolve the problem.

Wendy Boka wasn’t just any client. She was a close friend and had been married to Dinesen’s college roommate, Brian Boka. Wendy and Brian were Dinesen’s first clients when he opened his accounting firm in Indianola.

Brian Boka died in early 2010, leaving Wendy a widow at age 29. She moved to Texas in December 2010 to start a new chapter in her life.

But she didn’t change accountants.

In April 2011, Dinesen e-filed Wendy and Brian’s final joint tax return.

The e-file was rejected.

“I thought it was just a software glitch. That’s not uncommon,” Dinesen explained.

He refiled and it was rejected again.

Dinesen called the IRS and was told a return using Brian Boka’s Social Security number had already been filed.

“I had to call Wendy and tell her someone had stolen Brian’s identity and was using it to try to get a refund check,” Dinesen said.

“I was completely surprised. This was first that I had any idea that someone was using Brian’s identity,” Wendy Boka Gonzalez told Iowa Watchdog in a phone interview. She now lives in San Antonio and recently remarried.

The IRS told Dinesen all he needed to do was file a paper copy of Wendy and Brian’s return. It would be processed and Wendy would receive her refund.

Dinesen filed the paper copy and waited.

“You expect a certain slowness when you’re dealing with the IRS,” Dinesen said.

Dinesen regularly called to check on the status of the return. Each time he was told it was being processed.

By August Dinesen was no longer satisfied with that answer. He pressed for specific details.

Dinesen learned the return wasn’t being processed. A paper copy of the return wasn’t enough. A special identity theft form needed to be filled out, and the IRS wanted a copy of Brian’s death certificate.

“It was frustrating to learn I hadn’t been given the proper information to begin with, but it wasn’t surprising,” Dinesen said. “And it wasn’t surprising that there would another delay after submitting the additional paperwork.”

What was surprising was the collection letter Wendy received from the IRS for supposedly failing to file a 2010 tax return.

“I started getting mad,” Boka Gonzalez said. “I felt like I was some trying to do the right thing. I had paid my taxes, we had filed all the forms they had asked us to, and now I was getting a letter threatening me with collection actions.”

“It was especially infuriating since they owed me money.”

Dinesen immediately contacted the collection division. He was told they had no record of the return. The identity theft unit was handling it, and the collection division’s computers weren’t capable of interfacing with the identity theft unit’s computers.

“I asked if he could just call the identity theft unit to confirm the return had been filed. He said he couldn’t. His explanation for why not boiled down to, ‘We don’t do that,’” Dinesen said.

The agent agreed to suspend collection actions against Boka Gonzalez while Dinesen tried to resolve the case.

“He also asked me to give him a call if I got any information from the identity theft unit. It seemed ridiculous to me that one part of the IRS would ask an outside person to keep him informed of what another part of the IRS was doing, but that was the level of dysfunction we were dealing with,” Dinesen said.

More months dragged by with no action or satisfactory answers.

At Dinesen’s urging, Wendy contacted the IRS Taxpayer Advocate Service.

“The advocate I spoke with very sympathetic and had a helpful attitude,” Boka Gonzalez recalled.

That helpful attitude lasted exactly two phone calls.

“After that, I always got his voicemail and he never returned any of my calls,” Boka Gonzalez said.

Dinesen had even less luck with the taxpayer advocates.

“They’re supposed to better trained than the normal, the average IRS call center worker, and they are supposed to be solely dedicated to helping the taxpayer, but they were least helpful people I dealt with,” Dinesen said.

“One of them even shouted at me when I pressed him for answers.”

While the taxpayer advocates weren’t being helpful, their boss was at least acknowledging  a problem.

In her 2012 report to Congress, National Taxpayer Advocate Nina Olson stated bluntly the IRS “fails to help hundreds of thousands of victims of identity theft.

According to the report, the IRS had almost 650,000 unresolved cases involving identity theft. The report contains the optimistic sounding claim that the average case took six months to resolve.

“After years of ineffective efforts to reengineer its processes, the IRS still takes too long to fully resolve the accounts of victims,” Olson told Congress.

After more than a year spent trying to get the IRS to do the right thing, Jason Dinesen didn’t need Olson to tell him that.

In August 2012, Dinesen and Boka Gonzalez were finally able to arrange a conference call with the agent actually handling the return.

“What we were told was that the return couldn’t be processed because Brian’s name was listed first on the return, but Wendy’s name was listed first on the identity theft form we’d submitted. He explained we’d have to submit the form again with Brian’s name listed first,” Dinesen said.

“I asked how long it would take to finish processing the return after the new form was submitted and was told it would take between 90 and 200 days,” Dinesen said. “I’ve never been given a time frame like that before.”

Dinesen submitted a new identity theft form with the names in the correct order.

He kept calling to keep track of the return. “It was on my mind almost every day,” Dinesen said.

Weeks dragged by and finally the IRS was ready to issue a refund check to Wendy.

But there was a problem.

“Because of how the IRS computer is programmed and because Brian was listed first on the 2010 return, the refund check had to be sent to Brian’s last known address. Even though they knew Brian was dead. Even though they had Wendy’s current address,” Dinesen explained.

“I felt like I had almost reached my breaking point,” Boka Gonzalez recalled. “It was the grossest incompetence. It was mind boggling to me that they could acknowledge something was wrong, they knew what had to be done, but no one could do anything about it.”

The IRS solution to the problem was to send the check to the old address and, after it was returned as undeliverable, reissue the check to Wendy at the correct address.

Still more weeks dragged by.

Dinesen discovered the check deliberately sent to the wrong address had been returned, but the agent still hadn’t figured out how to get the computer to issue a check to the correct address.

Under pressure from Dinesen and Boka Gonzalez, the agent finally resorted to a “special procedure.”

“They got an actual person to issue the check,” Dinesen said.

Boka Gonzalez received her refund check two years, three months and 28 days after the return was first filed.

“Looking back on it, it would be almost funny if they hadn’t been making life unnecessarily hard for a young widow who was in the middle of trying to rebuild her life,” Dinesen said.

He laughed slightly and added, “It was pretty much the bureaucratic equivalent of slapstick. One pratfall after another.”

Those pratfalls are why Dinesen is skeptical about the new Senate bill.

“Having a single contact person would be good, but only if that person had the power to make the various divisions of the IRS work with each other and share information. Plus, you’d have to make sure that person would do the most basic things like return phone calls,” Dinesen said.

“Based on my experience, I’m not hopeful.”

Contact Paul Brennan at pbrennan@watchdog.org. This story originally appeared on Watchdog.org.