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Lingering unemployment tax troubles: wrong amounts, wrong recipient ID info and no forms

Job seeker got work sign
In addition to looking for another job, folks who got unemployment benefits also have to deal with paying taxes on the payments and, in some cases, other complications.

Unemployment benefits can be a lifesaver. That's been especially true during the year+ that we've been dealing with COVID-19 complications.

Employers had to reduce services or close completely. In addition to the business costs, the establishments' workers were suddenly facing steep pay cuts or no pay at all.

Congress has boosted state unemployment insurance (UI) benefits through much of the coronavirus pandemic. The latest federal UI add-on is set to expire in mid-March, but the Biden Administration COVID-19 relief bill would extend it again. The White House is pushing the House and Senate to finalize the package quickly so that there's no lapse in payments.

Meanwhile, many individuals who got unemployment benefits in 2020 are discovering they owe tax on that assistance. Yep, despite the efforts of the Internal Revenue Service and media (including the ol' blog's post here), too many people didn't realize that the help is taxable income.

But that's just part of the problem that UI recipients are facing.

Wrong tax statement amounts: Many individuals have reported that the official tax statement, Form 1099-G, they received is wrong. The discrepancy could be as simple as those who got the payments not keeping good track of the amounts.

That's understandable. They were more concerned with putting the much-needed money to use paying overdue bills and providing necessities for their families.

In some cases, though, the erroneous 1099-Gs could be an indicator of UI benefits identity theft and fraud. If this happened to you, contact your state employment office as soon as possible to clarify the situation.

If you don't get a corrected tax statement in time to file your return by the (for now) April 15 due date, the IRS says to report the accurate unemployment amount; that is, enter on your Form 1040 only the income you did receive.

Wrong taxpayer identifiers: Vermont residents are dealing with their own wrong data dilemma.

In this case, the discrepancies on the Form 1099-Gs issued by the Vermont Department of Labor (VDoL) involved the recipients' personal and tax identifying information. Specifically, Vermont form recipients told the department that the name and Social Security number on their forms weren't theirs.

In response, the department earlier this month issued a mass recall of all Forms 1099-G that it mailed for 2020. VDoL says all unemployment claimants will receive a new Form 1099-G. It's a major undertaking. The state administered nine different types of benefits through five different unemployment programs in 2020.  

Vermont's Labor department is sending instructions to everyone who received a Form 1099-G, along with a self-addressed stamped envelope they could use to return an incorrect form to the department.

The good news, according to Green Mountain State officials, is that the forms with wrong information do not impact an individual's claim or benefits. This issue is specific to the printing and mailing of the Forms 1099-G.

VDoL also notes that no incorrect tax information has been shared with Vermont or Federal tax departments (including the IRS). The state says it will ensure that correct 1099-G forms are sent to the IRS for proper tax reporting.

Online-only issue: Then there are the folks who are still waiting for their 1099-G to show up in their snail mail box. Some of these folks will be waiting for a long time. Forever, in fact.

That's because some states don't use the U.S. Postal Service to deliver UI tax statements. As the IRS Tweet below notes, in these cases the unemployment recipients need to retrieve their tax info online at the issuer's website.

If you need to contact your state officials, either to discuss an issue with your 1099-G or get your form, you can find its street address, phone number and website information at the U.S. Department of Labor's directory of state labor offices.

You also might find these items of interest:

 

Coronavirus Caveat & More Information
In 2021, we all still are dealing with extraordinary circumstances,
both in our daily lives and when it comes to our taxes.
The COVID-19 pandemic and efforts to reduce its transmission
and protect ourselves and our families means that,
for the most part, we're focusing on just getting through these trying days.

But life as we knew it before the coronavirus will return,
along with our mundane tax matters.
Here's hoping that happens soon!
In the meantime, you can find more on the virus and its effects on our taxes
by clicking Coronavirus (COVID-19) and Taxes.

 

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