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FMG Law Blog Line

Massive Unemployment Fraud Brings Some Taxpayers Another Nasty Pandemic Surprise

Posted on: March 9th, 2021

By: Barry Miller

Last spring FMG reported that the pandemic was making accountants attractive targets for hackers. Extended tax deadlines and stimulus checks keyed to tax information created the incentive for fraud. This year, Krebs on Security warns that “The Taxman Cometh for ID Theft Victims.”

The issue arises from another pandemic-related issue—massive unemployment insurance fraud. Krebs article notes that hacker stole more than $11 billion from California alone that by appropriating the information of California residents who were entitled to those benefits. Now California’s system shows that those benefits were paid, although the proper payee never received them.

And those benefits are taxable.

Which means that by January 31 thousands of people across the county received 1099-G forms reporting that they had received taxable benefits. California is not alone. AARP reports the unemployment fraud total across the county to be $36 billion.

The Internal Revenue Service issued guidance to taxpayers in a January 28 bulletin, advising those who received unexpected 1099-G forms to contact the state agency that issued and request a revised form. “Taxpayers who are unable to obtain a timely, corrected form from states should still file an accurate tax return, reporting only they received,” said the IRS.

The Insider advises those who received a 1099-G showing fraud to make sure they file a federal return by April 15, reporting only actual income received, and file a corrected form 1099-G after receiving it. Forbes gives more detailed suggestions, including reporting insurance fraud to employers and the state unemployment agency, the Federal Trade Commission, and the three major credit bureaus.

For more information, please contact Barry Miller at [email protected].

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