IRS warns of Unemployment Comp Identity Theft Scams thanks to COVID

The Internal Revenue Service (IRS) has warned that the scammers are working overtime to hack people’s identities. They have come out with a warning relating to unemployment benefits that have impacted the country at large.

Due to COVID related closures, many were laid off from their jobs, requiring them to fill out 1099-G forms for their benefits. Further, given that many state unemployment agencies are overwhelmed and unable to respond to requests or audits, it creates a perfect storm for scammers. Note that the stimulus payments are not included in this, in the words of the IRS ““No, the payment is not income and taxpayers will not owe tax on it. The payment will not reduce a taxpayer's refund or increase the amount they owe when they file their 2020 or 2021 tax return next year. A payment also will not affect income for purposes of determining eligibility for federal government assistance or benefit programs."[1]

Scammers have taken advantage of breaches and used social security numbers to file claims in place of the intended recipient. Due to the mass influx of unemployment claims, the states might be slow to realize that people are being scammed. Regardless, the IRS is advising those who received suspicious forms to contact their respective state agency for a revised form, as many incorrect forms are going out when they aren’t supposed to, especially to those who claim they are id fraud victims. A corrected Form 1099-G showing zero unemployment benefits in cases of identity theft will help taxpayers avoid being hit with an unexpected federal tax bill for unreported income,” said the IRS[2]

The damage is already being seen in states like California. There, it was revealed that scammers were able to use pilfered date to wire COVID relief money from the state government to unscrupulous actors, using identities such as Diane Feinstein and Drew Peterson. The losses so far top $9.8 Billion.[3]

Tax season is the best time for these scammers to come out and steal people’s identities. With more people filing more paperwork, it is easier for them to slip through the cracks. Stay vigilant and be wary of anything that you didn’t intend to receive.

 

[1] https://www.aarp.org/money/taxes/info-2020/are-stimulus-checks-taxed.html#:~:text=As%20people%20start%20to%20spend,not%20owe%20tax%20on%20it.

[2] https://www.accountingtoday.com/news/irs-warns-of-identity-thieves-stealing-unemployment-benefits?position=editorial_1&campaignname=ACT_Daily_Daily-02012021&utm_source=newsletter&utm_medium=email&utm_campaign=ACT_Daily_Daily%2B%27-%27%2B02012021&bt_ee=k4a9VXDSbMYpQHAlO2BzLvaf%2BjDoPSdbDA8DqG0YzStFMiU%2BvZspQsoYaZiMRgt5&bt_ts=1612177237193

[3] [3] https://www.ktvu.com/news/california-unemployment-fraud-could-top-9-8-billion

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