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Identity Thieves Collect Unemployment — Victims Get Tax Bills

An 85-year-old retiree was shocked by a 1099 form showing jobless benefits in her name

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An 85-year-old woman in Boulder, Colorado, was upset and unnerved by a notice that she received in the mail on Jan. 27. It was a government form stating she received $2,322 in unemployment compensation last year.

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"Never in my life — never” had she sought or received jobless benefits, the woman tells AARP (she spoke on the condition that she would not be named). A professional who retired more than 25 years ago, in 1995, she would never dream of seeking unemployment benefits during her golden years. Astonished that a bogus application in her name was approved, she says having her identity stolen left her sick to her stomach, gave her sleep troubles and made her stressed about what calamity involving her financial accounts could be next.

She is, unfortunately, part of a massive group of Americans whose identities were hijacked in 2020 by criminals filing fake claims for unemployment.

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Form 1099-G shows certain government payments including unemployment compensation.
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What's next is critical: Victims are urged to tell officials in their states that they need a revised Form 1099-G, which lists amounts paid in unemployment and the federal income taxes withheld on these payments. In Colorado a victim can do so using an online form to report an invalid 1099-G to the state Department of Labor and Employment.

The Internal Revenue Service (IRS), in a Jan. 28 announcement, made these key points:

  • States send Form 1099-G to both the taxpayer and the IRS to show what taxable income the states issued. Unemployment benefits are taxable.
  • In cases of identity theft, a corrected Form 1099-G showing zero unemployment benefits will help taxpayers avoid an unexpected federal-tax bill for unreported income. Those who are unable to obtain a timely, corrected form from their state should still file an accurate tax return, reporting only the income they received.

Start of tax season reveals fraud

These issues are emerging now as Americans begin receiving key documents to calculate their taxes. Once the coronavirus roared into the U.S. in 2020, millions of people lost their jobs (or saw their hours cut) and filed for unemployment compensation. That Congress approved pandemic relief that fattened the weekly benefits made the payments more lucrative for both bona fide recipients and crooks.

Scammers “took advantage of the pandemic by filing fraudulent claims … using stolen personal information of individuals who had not filed claims,” the IRS has acknowledged.

USA Today investigation published at year's end showed that an estimated $36 billion in phony unemployment claims were paid to fraudsters in 2020, with sham applications in all 50 states.

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The widespread fraud and abuse of the system has resulted in the AARP toll-free Fraud Watch Network Helpline's (877-908-3360) receiving more than 25 complaints a day from victims — like the Colorado woman — who received a Form 1099-G without taking a penny in unemployment.

The calls to the helpline come from across the country, says AARP's Amy Nofziger, who is the operation's director. Thieves, she notes, “don't care where you live.” As for the many victims, she says they “feel confused and nervous about who has been using their information. For most people this has come as a shock to them. Plus, all of us are a little anxious right now because of the pandemic."

More steps to protect yourself

The IRS also urges identity theft victims to:

  • Visit Identity Theft Central for more on remedial steps.
  • Request an Identity Protection PIN from the IRS if they are concerned about protecting their identity when filing a federal-tax return. The PIN is a six-digit number that prevents someone else from filing a tax return using the concerned person's Social Security number.

Nofziger also tells victims to:

Another resource is available from the Federal Trade Commission (a consumer protection agency): the website, which is billed as the U.S. government's one-stop resource for identity theft victims.

For the Colorado woman, the arrival of the flawed Form 1099-G meant numerous calls, including to the state Department of Labor and Employment, the Social Security Administration, her retirement plan, the local district attorney and local police. Her advice? Keep a call log reflecting the time and date of your calls and take good notes, since you may need the information in the future.

She knows now that she's got plenty of company. In fact, when she spoke to the police, an officer shared that he, too, had been dinged by a bad 1099-G and was dealing with the same “rigmarole."

Katherine Skiba covers scams and fraud for AARP. Previously, she was a reporter with the Chicago Tribune, U.S. News & World Report and the Milwaukee Journal Sentinel. She was a recipient of Harvard University's Nieman Fellowship and is the author of the book Sister in the Band of Brothers: Embedded with the 101st Airborne in Iraq.

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