1099-G Form Could Surprise Many with Unemployment Benefits Fraud

• The Internal Revenue Service (IRS) and the Identity Theft Resource Center (ITRC) expect to see an increased number of Americans who are victims of 1099-G form fraud due to unemployment benefits obtained in their name. In fact, the ITRC has already received calls and like-chats about the fraud.
• Unemployment benefits fraud has led to a large spike in identity-related fraud cases recorded at the ITRC. Also, the Department of Labor Inspector General estimates that as much as $26 billion in pandemic-related unemployment benefits were obtained by fraud.
• The IRS says anyone who receives a 1099-G form related to unemployment benefits that were not received should contact the state (or states) that paid the benefits to request an amended 1099-G form that can be sent to the IRS as proof they did not receive the funds. 
• The IRS also encourages people to file their taxes early and use direct deposit for the quickest refunds. The IRS will begin accepting and processing 2020 tax returns on February 12.
• Anyone who believes they are a victim of 1099-G form fraud or unemployment benefits fraud should contact the ITRC toll-free by phone (888.400.5530) or live-chat on the ITRC’s website.

Tax season is right around the corner. On February 12, the Internal Revenue Service (IRS) will begin accepting and processing 2020 tax returns. While consumers look for their W-2 forms for wages and 1099 forms for non-wage income, some consumers may find themselves victims of 1099-G form fraud from an identity crime that started to spike in the spring of 2020.

The Identity Theft Resource Center (ITRC) has already begun to receive phone calls and live-chats from victims stating they received a 1099-G form, wondering what to do next. According to The Vermont Labor Commissioner Mike Harrington, in Vermont, 1099-G forms for nearly 44,000 people were sent to the wrong address after a likely mix-up.

These are issues the ITRC and IRS recently discussed on the Fraudian Slip, the ITRC’s podcast, where we talk about all-things identity compromise, crime and fraud, including the impact identity issues have on people and businesses.

Unemployment Benefits Fraud

People have been falling victim to unemployment benefits fraud since the COVID-19 pandemic began, leading to a rise in unemployment. In an average year, the Identity Theft Resource Center (ITRC) is contacted by fewer than 20 unemployment benefit fraud victims. However, in 2020, more than 700 victims of unemployment benefits fraud reached out to the ITRC, and more than 6,000 consumers visited the company website idtheftcenter.org to find information about unemployment benefits fraud.

Also, the Department of Labor Inspector General has informed Congress that as much as $26 billion or more in fraudulent pandemic-related unemployment benefits have been paid. California officials say the amount of fraud in the state is at least $11 billion.  

1099-G Form Fraud due to Unemployment Benefits Fraud

As staggering as the numbers for unemployment benefits fraud were in 2020, the number of people who found out they were impacted by the fraud could rise even more once tax season begins. More Americans than ever are likely to receive 1099-G forms that report how much government benefit income a taxpayer received. If an identity criminal used someone else’s information to file for unemployment benefits, the benefits are considered taxable income that will be reported to the IRS by the state paying the benefit. While states are aware of many fraudulent payments, some fraudulent unemployment benefits may have gone undetected. The IRS expects to see a rise in taxpayers that contest their 1099-G forms claiming they did not receive any unreported income from government benefits.

What Consumers Should Do

There are several steps that consumers should take if they receive an inaccurate 1099-G form.

• Contact the state(s) that issued the 1099-G– The IRS advises taxpayers who receive an incorrect Form 1099-G for unemployment benefits they did not receive to contact the issuing state agency and request a revised Form 1099-G showing they did not receive these benefits. Taxpayers who cannot obtain a timely, corrected form from states should still file an accurate tax return, reporting only the income they actually received. A corrected Form 1099-G showing zero unemployment benefits in cases of identity theft will help taxpayers avoid being hit with an unexpected federal tax bill for unreported income. Taxpayers do not need to file a Form 14039, Identity Theft Affidavit, with the IRS regarding an incorrect Form 1099-G. The identity theft affidavit should be filed only if the taxpayer’s e-filed return is rejected because a return using the same Social Security number already has been filed.
• Apply for the IP PIN– The IRS now allows any taxpayer who can verify their identity to seek an “Identity Protection PIN.” The IP PIN can be used when filing an income tax return to help prevent cybercriminals from filing fake tax returns. Consumers can visit IRS.gov and click on the Identity Theft Protection link at the bottom of the home page to apply for the IP PIN. While it does not prevent unemployment benefits fraud that already occurred from impacting their tax return, it can still protect them from tax identity theft.
• File taxes early– While this tip does not apply to unemployment benefits fraud, it is always a good idea for people to file their taxes as soon as possible to reduce the likelihood of a criminal beating them to it. The IRS says consumers should file electronically and use direct deposit for the quickest refunds.

If anyone believes they are the victim of 1099-G form fraud, unemployment benefits fraud or both, they can contact the ITRC toll-free for help. Victims can call to speak with an advisor (888.400.5530), live-chat with an expert or send an email during business hours. All people have to do is visit idtheftcenter.org to get started.