Americans are experiencing unemployment fraud as they started to receive documents for calculating their taxes. These scams have increased with the rise in unemployment due to the COVID-19 pandemic. Scammers are using stolen names and personal information for filing and receiving unemployment benefits. This fraud is affecting people who have lost their jobs and is also costing states millions of dollars.

Identity thieves are targeting taxpayers and government unemployment systems to steal individual information and file false claims to draw money. Most people learned about the fraud after receiving notices from the unemployment benefits office or their employers about their application for benefits. It has been reported that an estimated 36 billion were paid in bogus unemployment claims in 2020 throughout the U.S.A.

The IRS has informed taxpayers receiving Form 1099-G, reporting unemployment benefits that they have not received should get a corrected form stating they haven't received the benefits. Taxpayers should file a correct income tax return even if they didn’t get the correct form and should report the income they received. The IRS further stated on its website last year that victims of identity theft should submit a corrected Form 1099-G  reporting $0, with the IRS if the payments are incorrectly reported and made due to identity theft. Such victims do not need to file a Form 14039 with the IRS reporting inaccurate Form 1099-G.

It is important to be vigilant and protect yourself from such unemployment identity fraud. There are steps that can be taken to guard yourself from falling prey to fraud.

• One should stay informed about the increase in unemployment fraud in his/her state.
• Protect your Social Security number. Do not disclose the Social Security number unless it is very important to disclose. In case of lost or theft of Social Security card, take immediate steps to report the theft and replace it.
• Do not publish exact date of birth, insurance, and debit or credit card numbers on social media.
• Do not connect to public Wi-Fi. If you do so, make sure to enable mobile security and VPN on your mobile phone to protect your data and information.
• You can also request an identity protection pin from the IRS, now available to all taxpayers. The six-digit pin provides additional security and protects you from falling victim to identity theft while filing a federal tax return.

Reporting the crime the soonest possible is important. There is a list of websites and hotlines at the U.S Department of Labor website to report unemployment fraud. The federal government's one-stop resource (IdentityTheft.gov), which is a consumer protection agency, also provides a platform for identity theft victims and guides them through the recovery process.

The unemployment benefits that are received by the taxpayers are taxable for the federal income tax purpose and they should be reported while filing 2020 income tax returns in 2021, reminded the IRS. The forms will report the benefits taxpayers have received in the year 2020 and whether or not any federal tax was withheld.