The agency said Tuesday it launched 1,492 criminal investigations into identity theft last year, a 66 percent increase from the year before.
Prosecutions and indictments more than doubled. The numbers dwarf those from just two years ago.
(Read more: ID thieves target tax returns)
In all, the agency said Tuesday it has flagged 14.6 million suspicious tax returns since 2011, blocking more than $50 billion in fraudulent refunds.
New IRS Commissioner John Koskinen told reporters this week that stopping identity theft was a top priority for the agency.
"The people working on that are confident that while it's a growth industry for the last two or three years that it's getting under control," Koskinen said at his introductory news conference Monday. "I would stress that it's an area that has everybody's attention."
In a common scam, thieves use stolen Social Security numbers to file tax returns early in the filing season so they can claim refunds before legitimate taxpayers file their returns. The IRS, which prides itself on issuing quick refunds, often sends out refunds before it receives documents verifying wages and other income from employers and financial institutions.
Koskinen said waiting for such documents could delay refunds for months. This year, the IRS boasts on its website that it expects to issue "more than nine out of 10 refunds in less than 21 days."
A recent inspector general's report said the IRS is stepping up efforts to fight identity theft but thieves are getting more aggressive.
The IRS issued $4 billion in fraudulent tax refunds in 2012 to people using stolen identities, according to the inspector general's report released in November. The IRS sent a total of 655 tax refunds to a single address in Lithuania, and 343 refunds went to a lone address in Shanghai, the report said.
The agency said it has since improved its computer filters to flag suspicious refunds, including cases in which many refunds go to the same address. On Tuesday, the IRS said more than 3,000 agents were working to fight identity theft
The agency said a coast-to-coast sweep in January 2013 led to 109 arrests and 189 indictments.
The issue has exploded in just a few years. In the 2011 budget year, the IRS recommended 218 cases of suspected identity theft for prosecution, a number that grew to 1,257 last year. The number of indictments grew from 165 to 1,050 in the same period.
Last year, 438 people were sentenced in identity theft cases, the IRS said. Sentences ranged from two months in prison to more than 26 years.
—By The Associated Press.