SACRAMENTO, California (AP) – Unemployment agencies across the country were bombarded with so many allegations during the pandemic that many struggled to distinguish the correct from the criminal.
Simple tax forms – barely enough to fill half a sheet of paper – reveal the extent of the identity theft that made state-run unemployment offices profitable targets for fraud after millions of people lost their jobs during the pandemic.
Unemployment benefits are taxable, so government agencies need to send a tax form – known as a 1099-G – to people who have received the benefits so they can report the income on their tax returns. States are sending very large numbers to 1099-Gs this year after processing and paying a record number of unemployment claims.
Teri Finneman of Lawrence, Kansas, was surprised when she received a form stating that she had paid taxes on $ 1,500 in unemployment payments she had never received – a sign that someone had probably stolen her personal information and used it to benefit claim.
“It’s extremely frustrating how much Kansans has been affected by this,” she wrote in an email to The Associated Press.
Nearly 26 million people applied for unemployment benefits in the first months after states ended the pandemic. The unprecedented revival offices for state unemployment that are regulated by federal rules but applied to patchwork quilts by state governments.
The federal government, as part of its $ 2 trillion aid package approved in March, significantly expanded unemployed aid and made it a richer target for fraud. In November, states across the country said they had paid as much as $ 36 billion in improper benefits, with a significant portion obtained through fraud, according to a report from the U.S. Department of Labor’s Office of Inspector General.
The fraud was so widespread that California issued payments to someone named U.S. Senator Dianne Feinstein, and in Ohio, Republican Gov. Mike DeWine, his wife, Fran, and Republican Lieutenant General Jon Husted all learned that there were fraudulent claims. filed in their names.
Unemployment agencies may now face another onslaught – this time from people applying for customized tax forms.
“It does open a can of worms,” said Rob Seltzer, a Los Angeles-based certified public accountant and a member of the California Society of CPAs. “It really depends on how fast the (state) can send out a corrected form.”
Ohio has set up a phone line and created a website that allows residents to report identity theft. Once the state confirms that fraud has been committed, taxpayers will receive a corrected 1099-G form. According to spokesman Thomas Betti, 62,000 people have submitted a report in the past two weeks.
“It’s easy for someone to be like, ‘This is not my problem. They sent the form to me, I’ve never been to Ohio. “You have to take care of this,” Betti said. “Every unemployment system in the country is dealing with this huge fraud.”
Last month, the IRS said it is likely that many victims will not be able to get a tax form in time to file their federal taxes. In those cases, the IRS says taxpayers should ignore the 1099-G and file their taxes without reporting the fraudulent income.
Christina Elliott, owner of BEM Financial Services, is concerned about the process that could delay tax refunds for people who count on it through the pandemic. She has two clients – one in California and one in Georgia – who say they received the wrong forms showing that they received as much as $ 27,000 in unemployment benefits last year.
“They’ll literally have to investigate everyone,” Elliot told the IRS. “These people stole all their identities that they did not know. Here’s another problem where they will wait months to get their (tax refunds) owed to them. ‘
The problem could be the worst in California, where officials posted nearly 8 million tax forms last month – more than five times as many as they sent in a normal year. The Department of Employment Development said it has updated its website and hired another 300 agents for its call center to train them on how to handle questions about the 1099-G forms.
The eradication of fraud and identity theft was an ongoing struggle for the agency. A state audit released last week showed that it responded to less than 2% of fraud reports from April to October. By November, there were more than 77,000 such reports.
It probably contains a report from Greg Musson, who owns a business near Fresno. Government officials contacted his company in September to let him know that one of his employees had applied for unemployment benefits in March. Musson was surprised to learn that the person he was. He froze his credit and filed a fraud report with the unemployment department, but so far he has not heard anything about it.
“Knowing that someone has my information and could get really personal in it is like breaking into your home,” he said.
Carol Williams, deputy chief operating officer for the California Department of Employment, said people who receive incorrect tax forms should fill out a worksheet on the department’s website that allows officials to determine if a fraudulent claim has been filed.
But state lawmakers are concerned that the agency may not be able to handle the workload. Republican Sen. Scott Wilk said one of his constituents was “dumbfounded” to receive a notice that he owes $ 11,000 in unemployment benefits.
“At a time when we really need people to have confidence in their government, go through this pandemic and deploy the vaccine, the last thing we need to do is further shatter their confidence in our ability to be competent,” “Wilk said.
___
Associated Press reporters John Hanna in Topeka, Kansas; Andrew Welsh-Huggins in Columbus, Ohio; and Christopher Rugaber in Washington.