The federal government responded to the massive job cuts last year by posting an extrain the pockets of people receiving unemployment benefits, and then later in the year (the The money supported laid-off workers from hard-hit sectors closures, including the restaurant, concert and tourism sectors. It also caught the eye of
But fraudsters also got a payday,The Inspector General of the United States Department of Labor said in February that at least $ 5.4 billion in unemployment claims were fraudulent and that an estimated $ 63 billion in total fraud would have occurred by 2020. California has said it has found more than $ 11 billion in fraudulent claims, with another estimated $ 19 billion in claims being investigated as suspicious.
Many people found out that their identities had been stolen when they tried to file for unemployment last year but found outin their name. Others may not have noticed until this tax season, when they received a Form 1099-G from a government unemployment agency for the 2020 tax year.
That’s the tax form that records all the income you have received from unemployment benefits, in addition to other taxable government benefits. If you see the income in box 1 on the form, it is unemployment benefit and you owe tax on it.
But what if you’ve never filed for unemployment let alone a check from the government? Fortunately, the federal government has simple steps you can follow to address unemployment benefits that are fraudulently claimed on your behalf. Here’s what you need to know about paying your taxes if this happened to you, and what to do about the underlying identity theft.
Do I have to pay tax on the unemployment income that I never received?
Fortunately no. The IRS allows you to file a tax return that excludes unemployment income fraudulently claimed by someone else, even if you receive a 1099-G with the stated income.
First, you need to contact the government unemployment service that issued the money and let them know about the fraud. This website of the United States Department of Labor can connect you to the appropriate government agency. Next, you need to ask that agency to issue an adjusted 1099-G without the stated unemployment income.
You don’t have to wait for the corrected form to arrive before filing your taxes, according to the IRS. Once you file for the adjustment, you can file your tax return without including unemployment income. You also don’t need to file an IRS affidavit for identity theft, which only applies if someone fraudulently files a tax return in your name.
What should I do about identity theft?
Strangely, this part may be more complicated than paying your taxes. First, you can report the identity theft to three additional outlets: the Federal Trade Commission, the United States Department of Justice’s National Center for Disaster Fraud, and the Internet Crime Complaint Center, or IC3. The latter is part of a broader partnership between the FBI, the National White Collar Crime Center and the Bureau of Justice Assistance.
Next, you want to take some proactive steps to ensure that your personal information is not used in other places. Typically, thieves need your Social Security number to ward off unemployment fraud, which can also allow them to attack you in other ways.
The most common misuse of this information is opening new lines of credit in your name, which can seriously damage your credit. Check your credit report to make sure thieves aren’t taking out credit cards under your Social Security number, and consider freezing your credit. You can alsoand identity theft protection service.
Will this type of unemployment fraud continue?
Unemployment fraud was quite uncommon before 2020, according to Eva Velazquez, president and CEO of the Identity Theft Resource Center. It was not seen as lucrative.
In 2020, not only were additional resources available, but unemployment agencies were also crushed by applications. California Labor Secretary Julie Su explained to Congress on Tuesday that this prompted her office to drop a number of requirements that critics say could have made it more difficult for fraudsters to get past the system. If criminals continue to see unemployment agencies as easy targets, the trend could continue.
“We will feel this in 2021 and beyond,” Velazquez said. “It just goes to show that 2020 was a monumental weird and devastating year.”
Is there anything I can do to protect myself?
There is no way to make sure that no one ever applies for unemployment insurance in your name. If your social security number has been published (), that can always be a risk.
In addition to getting a 1099-G at tax time, or finding out after you’re fired that someone is taking benefits in your name, there could be other signs that something is wrong. You may receive a request for information from an unemployment agency, or your employer may receive a confusing phone call from the agency about your alleged lack of employment.
It’s best to respond to those warning signs early, even if you don’t have to claim unemployment benefits at the moment.
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