Unemployment Fraud Victims Saved By The Covid Bell?

Would you believe the latest fraud victims are those getting 1099-G forms from state governments telling them they got unemployment benefits they never applied for or received? The fraud may involve thousands of innocents & total in the billions of dollars, says the WSJ. Fortunately, the new Covid relief law will reduce the worry for most victims.

One case in point: “Michael Baird, a 33-year-old marketing manager in Chicago, hasn’t lived in Texas for several years. And yet there was a tax form from the state of Texas sitting at his parents’ house in Houston, showing that the state had paid him $1,014 in unemployment benefits.” As the newspaper noted, the 1099-G forms are sent by the state to the IRS to make sure federal taxes are accurately assessed.

Now comes the frustrating part. As often the case in fraud scenarios, the victims can have a hell of a time getting the wrong righted. Many states are recommending victims “freeze their credit” & report the fraud through the state unemployment agency’s website or fraud hotline…good luck with that one. The IRS is urging taxpayers to NOT INCLUDE income from fraudulent 1099-Gs on their federal tax return & to seek “corrected” forms from the states. May we also suggest a note attached to the federal return explaining the fraud & remedial steps taken with the state? Ironically, a “late change” to the stimulus or relief law just enacted will likely lessen the angst of most victims because for households making less than $150K in 2020, the first $10,200 per spouse won’t be treated as income. Big thanks for small favors?

Davd Soul