Victims of Unemployment Compensation Fraud Get Surprise IRS Tax Documents

• Author: Jacob Greene
• Posted: 2024-11-17

It is that time of the year where individuals and business organizations are filing taxes with several caveats at every corner. The Democrats have introduced new legislation for tax filers to stimulate the economy. The Biden Administration has made the first $10,200 of unemployment benefits nontaxable for each spouse in households with incomes below $150,000.

Many Americans have already filed their 2020 tax returns. It will take the IRS some time to update the computer systems to complete these tax returns. For taxpayers who have already submitted their 2020 tax returns, they must wait for guidance from the IRS as to whether they must amend their recent tax returns.
 

Surprise Tax Documents

However, many Americans have remained employed throughout this adverse economic climate, but now they are receiving fraudulent state 1099-G forms in the mail.

Consider Rebecca Ray, who is age 41 and lives in Greendale, Wisconsin. She went to her mailbox, and to her surprise, there was a 1099-G tax form from Colorado. Ray realized that the Colorado Department of Labor and Employment indicated that she had received benefits last year. Still, Ray had not applied for unemployment compensation since the great recession of 2008 and 2009.

This, however, was of great concern for Rebecca Ray. She wants to work again in the finance industry. "The thought of having anything on my record for my next background check totally freaks me out", said Ray. Her credit report and background check must remain perfect for the best optimal chances for successful employment.
 

Amended Tax Returns

The IRS wants taxpayers who have received fraudulent 1099-G forms for unemployment benefits to contact their state unemployment offices to receive amended 1099-G tax forms. You do not want to file fraudulent unemployment compensation forms with your standard tax return.

A customer service agent from the Colorado Department of Labor did advise Ray that she should receive an amended 1099-G form in the mail by March. The redistribution process may take some time, according to the spokesperson. Every request for updated 1099-G documents must be manually verified.

Michael Baird's parents checked their mailbox and saw a 1099-G form from the state of Texas that said Baird, age 33, had gotten $1,014 in unemployment compensation. Nonetheless, Baird had not lived in Houston, Texas, for several years. He is a marketing manager and lives in Chicago. He was concerned that once he files his tax return, the IRS will see that he is not paying taxes on the unemployment income.

Fraud victims can become confused when they get the invalid 1099-G tax forms. States are advising taxpayers who are victims of fraud to freeze their credit reports. Consider signing up for identity fraud protection services.

Many major corporations and retail outlets like Equifax and Target have been the subject of multiple system hacks. Your information can be lurking in various databases. Simultaneously, hackers and thieves wait for the most suitable time to use and sell your identification on the dark web for indiscriminate buyers. At the same time, you want to report fraudulent activity to your state's fraud hotline or the unemployment commission website.

The US Department of Labor collaborates with several federal and state agencies to activate the best-streamlined system in providing clear direction, support, information, and resources to people whose identities have been stolen for improper unemployment benefits.

Thieves have been hard at work since March 2020. Unemployment systems have lost billions of dollars in Federal money since Congress approved the $600 boost to regular unemployment benefits.
 

Massive Fraudulent Unemployment Claims

The labor department for Ohio had received 65,800 claims of fraudulent unemployment compensation on the state website since March 2, 2021. Colorado said that since early March, the state had received 11,700 reports of unemployment fraud from their residents.

According to the FBI, to pile on this agony, when victims of fraud lose their jobs and file for unemployment benefits, they receive notification that they are already receiving unemployment compensation.

Taxpayers are concerned about what the IRS will do if taxpayers do not get their amended tax documents in time. Lawmakers have the same concerns. Congressional members from the House of Representatives addressed a letter to the IRS with these concerns.

They cannot let the IRS hold up tax refunds while the agency investigates unemployment compensation fraud claims indefinitely. Some states are having residents verify their identities online before disbursement of benefits to combat unemployment fraud.