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TAS Tax Tip: How to Address Unemployment Compensation Related Identity Theft

Posted by Admin Posted on Feb 24 2021


During 2020, millions of taxpayers were impacted by the COVID-19 pandemic through job loss or reduced work hours. Some taxpayers who faced unemployment or reduced work hours applied for and received unemployment compensation from their state. States issue 1099-G, Certain Government Payments to you and to the IRS to report taxable income, including unemployment compensation.

However, identity thieves took advantage of the pandemic by filing fraudulent claims for unemployment compensation using stolen personal information of individuals who had not filed claims. Payments made as a result of these fraudulent claims went to the identity thieves, while the victims whose names and personal information were taken, did not receive any of the payments. However, the victims may receive a Form 1099-G saying that amount was paid to them anyway.

Here’s how you may find out if your information was used for false claims:

  • Receive a Form 1099-G for unemployment benefits that you did not receive.

If you receive a Form 1099-G for an amount you did not receive, contact the issuing state agency to request a revised Form 1099-G showing you did not receive these benefits. The state agency should send a corrected Form 1099-G reporting $0 in box 1 (zero benefits paid) to you (the identity theft victim) and then they will file a copy with the IRS as soon as possible after the error is discovered.

Act quickly if this is an identity theft situation. If you are unable to obtain a timely, corrected form from your state agency, you should still file an accurate tax return, reporting only the income you received. However, you may still get a notification from the IRS as your tax return is processed. See below for more information.

  • Receive a notification from the IRS, after filing a tax return.

You may receive some type of notification (e.g., letter) indicating:

  • that someone else used your Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN), or
  • that IRS income records – income from unemployment or income from an employer you did not work for – do not match what you reported to the IRS.

Both types of instances involve identity theft and can happen whether you file electronically or on paper. Different methods of communication are used by the IRS to notify you for each situation.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS      

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