IRS reported that unemployment compensation fraud was one of the more widespread ID theft plots last year. The impostors filed claims for the unemployment benefits using stolen personal information.
Unemployment compensation is considered taxable income by the federal government.
States report compensation to the individuals and to the IRS by using the Form 1099-G. Many people were surprised to receive Forms 1099-G in the mail for unemployment compensation they did not receive nor claim. Some taxpayers received forms from more than one state. It can affect their tax returns in 2021.
Here are some steps that you can take if you are a victim of the unemployment compensation fraud system:
- File an Identity Theft Affidavit with IRS if an electronically filed tax return is rejected by the system because your SSN has already been used.
- Report the fraud to state unemployment agency, and ask for a corrected Form 1099-G. Every state has its own procedure for registering unemployment compensation scam.
- File a tax return stating only the actual income you received. State unemployment agency may not be able to timely issue a revised Form 1099-G.
- Consider obtaining IRS Identity Protection PIN on the IRS website. People receiving false Forms 1099-G are ID theft victims, and their personal information can be used for a variety of illegal activities, as well as the filing of fraudulent tax returns.
- Consider steps to protect your credit.
- Business owners can help fight unemployment compensation fraud by answering promptly to state notices about employees filing benefits claims, especially when there is no history of those employees.
Isom Accounting and Tax CPA firm specializes in the tax representation of individuals and businesses in front of the IRS and other tax authority. Isom CPA firm is a Southern California boutique firm located in Rancho Cucamonga, CA, which provides nationwide virtual tax debt resolution, accounting and tax services to help its clients get and stay compliant with the tax agencies. Nataliya Isom, CPA is the founder of the Isom Accounting and Tax and is a member of the American Society of Tax problem Solvers, Tax Rep Network, CalCPA and AICPA.