Taxpayers can be victims of unemployment fraud. The IRS wants to help

Many Americans will receive an unwelcome surprise this tax season: the realization that they have been victims of unemployment fraud.

Millions of workers have collected unemployment benefits during the Covid pandemic. They have to pay tax on that aid.

But according to state and federal officials, criminals have massively stolen identities to collect benefits in the name of others. The victim, not the scammer, is the one who gets the tax return.

The IRS tries to avoid confusion and panic around fraud. It launched a website for victims of unemployment-related identity theft on Thursday.

More from Personal Finance:
State officials are calling on Biden to forgive $ 50,000 in student debt
New $ 1,400 incentive checks may come
The price of gas is rising. Here’s how to save

Individuals who receive a 1099-G tax form but have not received unemployment benefits may have fallen prey. (Some states may also have accidentally issued the form.)

“This is a critical issue plaguing labor departments in the United States that sometimes involve local, state and even international criminals,” Mark Butler, Georgia’s labor commissioner, said in a statement on unemployment fraud.

In California alone, the state-owned company issues nearly 8 million 1099-G’s. And according to the US Labor Department, more than 18 million Americans received unemployment benefits at the end of January.

Scammed taxpayers don’t end up having to pay the associated tax, and therefore their tax refund shouldn’t be delayed, according to the IRS.

But there are certain steps they must take, according to the federal agency:

• Contact the government agency that issued the form to report fraud;
• Ask the government agency to issue a corrected 1099-G. The state needs time to investigate the fraud and make any corrections;
• Taxpayers must file an accurate tax return (one with no unemployment income), even if they don’t receive an adjusted 1099-G on time. (The corrected form shows $ 0 in unemployment benefits.)
• View free credit reports for signs of additional fraud. Consider posting a credit freeze or credit fraud alert with the credit bureaus (such as Equifax, Experian, and TransUnion).
• File an identity theft complaint with the National Center for Disaster Fraud at the United States Department of Justice. Fill in a complaint form online or call 866-720-5721.
• Consider enrolling in the IRS Identity Protection PIN program. This helps prevent scammers from filing federal tax returns in the name of identity theft victims.