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Millions of Americans will receive tax forms for unemployment benefits this filing season. However, many will get them by mistake due to fraud, which will generate a potential headache for the recipients.
According to an estimate by the Office of the Inspector General of the Department of Labor, at least $ 36 billion has been lost due to undue unemployment payments, largely due to fraud.
That amount could top $ 63 billion, the watchdog said last week.
According to security experts, identity theft has been one of the most common scams. Scammers file fraudulent unemployment claims using personal data stolen from people who did not file it.
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The scammer obtains unemployment income, but the identity victim obtains the associated 1099-G tax form. The federal government treats unemployment benefits as taxable income. (However, some states do not tax any tax benefits).
Scammers were attracted to a relatively high pay per person, especially in the spring and summer, when the federal government paid an extra $ 600 a week. The pandemic unemployment assistance program was often targeted, as it allowed recipients to self-certify that they had lost a job.
“This is a critical issue given by U.S. labor departments that sometimes involve local, state, and even international offenders,” said Georgia Labor Commissioner Mark Butler on unemployment fraud.
What to do?
People who receive a 1099-G form but do not receive benefits should first contact the state unemployment agency to get a corrected form, according to the IRS. This revised 1099-G would show that the taxpayer had not collected money.
Some fear it will be difficult to reach state agencies, affected by delays during the pandemic amid the historic volume.
States may have different instructions or points of sale to report identity fraud. California, for example, established a designated hotline for questions on Form 1099-G and increased call center staff.
According to the IRS, taxpayers who are unable to obtain a corrected form at the time of filing their taxes should file an accurate return. In other words, they should only report the income they received and not the unemployment benefits reported in 1099-G.
But they should consider explaining in a footnote to their tax return that they received a 1099-G in error, said Michael D’Addio, director of New Haven-based accounting firm Marcum. Connecticut.
Taxpayers should also continue to request a corrected tax form even after filing it, he said. Otherwise, the IRS may not have up-to-date information on hand and may be informed of any discrepancies.
“At the end of the day, it’s very hard to get the IRS to accept that an item is not taxable when they have a form that says it’s taxable income,” D’Addio said. “He usually wants to get that corrected form out of state.”
The IRS issued guidelines to states in late December notifying them that they were not sending 1099-G to people considered victims of identity fraud, which should reduce the number of those affected.
Other information
According to the agency, taxpayers do not need to file an affidavit on identity theft to the IRS for an incorrect 1099-G. These affidavits are only necessary if the taxpayer’s electronic return is rejected because a return using the same Social Security number has already been filed, according to the IRS.
Those interested in stealing your personal information and wishing to protect your identity when filing your federal tax return can request an identity protection PIN from the agency. The PIN prevents another person from submitting a return with the taxpayer’s Social Security number.
According to the Georgia Department of Labor, there are other measures that are recommended to potential victims of identity theft to take. They include:
- Submit a police report and keep a copy to show to creditors and credit bureaus;
- Changing passwords for email, bank and other personal accounts;
- Ask credit card companies, banks, and other financial institutions to put a fraud alert in your account;
- Get a copy of your credit report and mark fraudulent transactions with any of the top three credit reporting companies (Equifax, TransUnion, or Experian). You can also put a fraud alert on your credit file and consider freezing it.