The Coronavirus Aid, Relief, and Economic Security (CARES) Act boosted unemployment benefits for the millions of Americans who lost their jobs during the pandemic last year. States were permitted to extend benefits by up to 13 weeks, and the Federal Pandemic Unemployment Compensation (FPUC) program offered taxpayers an additional $600 of weekly unemployment compensation for a short period. Even though these added benefits ended months ago, the U.S. continues to report a surge in fraudulent unemployment claims. Ohio alone reported 74,000 incidents of identity theft related to unemployment compensation as of February 2021. And sadly, many Americans are unaware they’ve even been victimized.
Taking Notice of Fraudulent Claims
Unemployment benefits are considered taxable income to the recipient. To help the IRS track taxable benefits, state governments issue 1099-G forms that reflect the benefits each taxpayer received through their state’s unemployment compensation program, including any amounts from the FPUC. Forms 1099-G were due to the IRS on January 31, 2021 and were mailed to taxpayers shortly thereafter.
In February 2021, some Americans began receiving 1099-G forms that reflected unemployment benefits they never received and never even requested. To many, this was the first indication they had been victims of identity theft. It is likely that scammers stole their personal information, filed unemployment claims on their behalf, and collected the benefits themselves.
How to Protect Yourself
The IRS provides helpful information to Americans wanting to protect their identity from fraudulent unemployment claims. They recommend that you first familiarize yourself with the signs of identity theft. An inaccurate 1099-G form may be the first and only sign that your identity has been stolen, but there may be other indicators. You may:
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- Notice a change to your credit report.
- Receive a notice from the IRS that states you created an online account, changed account information, or disabled an existing account.
- Have trouble e-filing your tax return.
- Receive a tax transcript in the mail that you did not request.
If you believe your identity has been stolen and used to file fraudulent unemployment claims, there are a few things you should do.
Report Your Identity Theft
Report your presumed identity theft to your state. Your state’s unemployment office, like Ohio’s Department of Job and Family Services, will hear your concerns and investigate if needed.
Request an Updated 1099-G
If you received an incorrect 1099-G, request that it be corrected. Because the fraud investigation can take time, you may not receive a corrected 1099-G in time to file your taxes, but get your request in as soon as you can.
File Your Taxes Timely
Don’t wait for an updated 1099-G. File your taxes timely, reporting only the unemployment compensation that you received.
Request an Identity Protection PIN
If your identity has been stolen to claim unemployment and you are concerned your information may be used to file a false income tax return, request an identity protection PIN (IP PIN) from the IRS. This PIN is unique to you. When filing your tax return, the IRS will request this PIN to better verify that you are the true filer.
Consider Filing an Identity Theft Affidavit with the IRS
If you received an incorrect 1099-G and reported the mistake to your state’s employment office, you do not need to file an identity theft affidavit with the IRS. But if you attempted to e-file your Federal tax return and received a rejection because a tax return using your Social Security Number had already been filed, you should file Form 14039, Identity Theft Affidavit to help the IRS determine a solution.
And as always, protect yourself from future fraud by monitoring your credit report and placing adequate safeguards on your personal data.
If you have questions about unemployment benefits and want to know how they will affect your taxes this year, contact us here.
