All across the country, scammers used stolen ID information to file false unemployment claims as the COVID-19 pandemic hit and the country saw widespread job losses. We’ve heard from teachers, retirees, corporate executives and others whose ID information was stolen and later used to falsely claim unemployment benefits.
The scam skyrocketed during the COVID-19 pandemic as unemployment claims in some states paid out up to $1,000 a week after jobless benefits were enhanced by the federal government.
Jobless benefits frequently ended up in the hands of the crooks who used stolen Social Security numbers and other information to file the jobless claims.
Now, 1099-G forms are being sent by state unemployment insurance agencies to the victims and the Internal Revenue Service.
The 1099-G form is necessary to file your tax return if you lost a job, experienced a layoff or faced a furlough in 2020. The jobless benefits received last year are included as taxable income on the 1040 federal income tax return.
The form, though, will be nothing but a headache for fraud victims once the IRS begins officially accepting returns Feb. 12.
The Internal Revenue Service issued guidance Jan. 28 to specifically address what steps taxpayers need to take if they receive Forms 1099-G for unemployment benefits they did not actually get because of identity theft.
What’s the first thing to do about a 1099 related to ID theft?
Report the fraud and the 1099 to the state unemployment insurance agency.
Do you report the jobless benefits on a tax return if you never received any?
The IRS said no, don’t report it. You should file an accurate return that reflects only the income you’ve received, not what the crooks received.
You want a corrected 1099 from the state to back you up. “A corrected Form 1099-G reporting $0 should be issued to the identity theft victim and filed with the IRS as soon as possible after the error is discovered,” according to earlier IRS guidance.
So don’t skip the first step; act quickly on that troubling 1099. You don’t want to wait until the last minute to try to address the problem.
But understand that it may take states a while to verify the fraud and issue a corrected 1099.
Are jobless benefits taxable?
Yes, if you received unemployment compensation in 2020, you must report that money as taxable income on your 2020 federal income tax return. That extra $600 in federal benefits is taxable, along with state benefits.
The 1099-G will show the amount of unemployment compensation received during 2020 in Box 1, and any federal income tax withheld in Box 4.
What do you do if you don’t get a correct 1099 by the April 15 deadline?
If you’re a victim of ID theft relating to the jobless scams, the IRS guidance does not recommend that you delay filing the return or seek an extension until Oct. 15. Instead, the IRS suggests that you file a return and report only the money you’ve received.
The tax filing deadline for 2020 returns is April 15.
— Tribune News Service