At the Better Business Bureau, we have been receiving a rash of calls regarding something that could cause you real problems with the IRS when you file your tax return and, according to one expert, “is the largest fraud attack on the U.S. ever. Period. And it’s not even close.”
It is unemployment fraud. Simply put, scammers file fraudulent unemployment claims utilizing stolen personal data of people who have not filed for unemployment benefits. Scammers receive the unemployment income, and the victim receives the 1099G tax form, a copy of which is also sent to the IRS. This means the IRS is told your income is much higher than you actually received. (Remember: Unemployment benefits are taxable; stimulus checks are not).
In Ohio, most of the fraud has occurred in the Pandemic Unemployment Assistance (PUA) program, which was part of a federally created relief act. In December, Ohio reported losses totaling $330 million so far through the PUA alone and stopped about 100,000 additional suspected fraudulent claims from being paid.
Nationwide, scammers have seen a huge opportunity in states’ and federal governments’ urgency to rush assistance to the thousands of victims put out of work due to COVID-19. The scam costs our governments more than $10,000-$20,000 per bogus claim. At least $36 billion of the $360 billion federally budgeted, has been lost to the scam and is projected to balloon to more than $63 billion.
The Ohio Department of Job and Family Services (ODJFS) has launched a hotline for people or employers to call if they received a bogus 1099G form for unemployment. The number, 833-658-0394, is staffed by workers 8 AM to 5 PM Monday through Friday. Those people or businesses can also go online to unemployment.ohio.gov to report suspected unemployment fraud.
As for the tax consequences when you file your return there are a couple of things you should do if you are in Ohio:
• First, contact the ODJFS to report suspected fraud and request the agency for a corrected form. The IRS says this revised 1099G would show the taxpayer hadn’t collected any money.
• Taxpayers unable to get a corrected 1099G form by the time they file their tax return should report the actual income they received and not the benefits reported on the 1099G and consider a footnote to their tax return explaining they received an erroneous 1099G form.
• For protection, taxpayers should continue to request a corrected 1099G form even after filing. The IRS may not have received the updated information and inquire about the discrepancy. Without the corrected form, it could be very difficult for the IRS to agree it isn’t taxable income when they have a form saying it is taxable.
This 1009G scam is a form of identity theft. To further protect yourself we encourage potential victims take these additional steps:
• Request an Identity Protection PIN from the IRS. It will prevent someone else from filing a return with the taxpayer’s Social Security number.
• Change passwords on bank and credit card and personal accounts as well as your email.
• If you received a bogus 1099G, ask banks credit card companies and other financial institutions to put a fraud alert on your account.
• Get a copy of your credit report. Flag any fraudulent transactions with the three major credit reporting companies (Equifax, TransUnion or Experian) and place a fraud alert on your credit file. Consider freezing your credit.
You are not alone. Consider this: If you received a fraudulent 1099G form for unemployment, you’re in good company. Ohio Governor Mike DeWine, as well as Lt. Governor Jon Husted, also received the tax forms even though they obviously were not unemployed.
Cheryl Parson is president of the Better Business bureau serving West Central Ohio. The BBB may be found on the Internet at www.lima.bbb.org.