While many people have been receiving unemployment checks since they have been laid off due to COVID-19, scammers have been taking advantage of the situation by using the personal information of identity theft victims to make their own state unemployment claims and receive payments.
The Federal Trade Commission (FTC) reports that in
2020 it has received 394,280 reports about government benefits fraud. In 2019
it received 12,900 benefits fraud reports. The U.S. Department of Labor Inspector
General estimates that up to $26 billion pandemic-related unemployment benefits
were obtained by fraud.
We all lose as taxpayers since this money is going to
thieves who do not qualify for unemployment payments. But the identity theft
victims are victimized a second time. Reports are starting to come into the
press about citizens receiving IRS Form 1099-G from the State Employment Security
Department (ESD) for unemployment payments that they did not receive. State unemployment
offices issue the 1099-G’s because unemployment payments are considered to be taxable
income. This may be the first alert that many people receive that they are
victims of identity theft. Not only did they not receive this money, but the
IRS thinks they owe taxes for money that was stolen from the unemployment
system.
The IRS recommends that if you receive a 1099-G for
funds that you did not receive to contact ESD and request a corrected 1099-G to
show that you did not receive the payments. When ESD sends you the 1099-G it
also sends a copy of that 1099-G to the IRS.
So, the state has reported income to you that you did
not receive, and the IRS thinks you received that income and owe taxes for that
“income.”
When it comes time to file your income tax return,
accountants are recommending that you acknowledge that reported income on the
appropriate line of your tax return then subtract that amount on the form with
a note that the amount reported by the state was due to fraud.
ESD still has a backlog of thousands of fraud
investigations and when it can send corrected 1099-G’s to the IRS is unknown.
Check out the sources below for more information about
the situation.
Internal Revenue Service:
https://www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin
Federal Trade Commission:
https://www.consumer.ftc.gov/blog/2021/02/identity-theft-awareness-week-starts-today
Krebs on Security:
https://krebsonsecurity.com/2021/01/the-taxman-cometh-for-id-theft-victims/#more-53733
KIRO TV News:
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