Taxpayers can be the victims of unemployment fraud. The IRS wants to help

Many Americans will get an unwelcome surprise this tax season: the realization that they were the victims of unemployment fraud.

Millions of workers collected unemployment benefits during the Covid pandemic. They have to pay taxes on the aid.

However, according to government officials and federal officials, criminals have stolen many people to collect benefits in the names of others. The victim, not the fraudster, is the person who receives the tax notice.

The IRS is trying to ward off confusion and panic surrounding fraud. It launched a website on Thursday for victims of unemployment-related identity theft.

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Individuals who receive a 1099-G tax form but have not collected unemployment benefits may have fallen prey. (Some states may also have issued the form incorrectly.)

“This is a critical issue that plagues labor departments across the United States, sometimes involving local, state, and even international criminals,” Georgia Labor commissioner Mark Butler said in a statement on unemployment fraud.

In California alone, the state agency issues nearly 8 million 1099-Gs. According to the U.S. Department of Labor, more than 18 million Americans collected unemployment benefits at the end of January.

Impaired taxpayers ultimately do not have to pay the associated taxes, and consequently their tax refunds should not be delayed, the IRS said.

However, according to the federal agency, there are certain measures they must take:

• Contact the state agency that issued the form to report fraud;
• Ask the state agency to issue a corrected 1099-G. The state will need time to investigate the fraud and make any corrections;
• Taxpayers must file an accurate tax return (one without unemployment income), even if they do not receive a corrected 1099-G on time. (The corrected form will reflect $ 0 in unemployment benefits.)
• Review free credit reports for signs of additional fraud. Consider posting a credit freeze or credit fraud alert with the credit bureaus (such as Equifax, Experian and TransUnion).
• File a complaint of identity theft with the U.S. Department of Justice’s National Center for Disaster Fraud. Fill out a complaint form online or call 866-720-5721.
• Consider joining the IRS Identity Protection PIN program. This helps prevent scammers from filing federal tax returns in the names of victims of identity theft.