Unemployment tax troubles: wrong 1099-G amounts & benefits ID theft
Thursday, February 11, 2021
Today's unemployment numbers offered a hopeful sign for the U.S. economy struggling with the COVID-19 pandemic.
The news, however, is not so good for many who in 2020 got these out-of-work benefits. Many recipients of the emergency financial assistance are surprised to learn that unemployment benefits are taxable.
Others are even more surprised at the amounts on their Form 1099-G. This is the document sent to taxpayers and copied to the Internal Revenue Service.
While social media messages and comments on the ol' blog are purely anecdotal, it seems that quite a few folks think their 2020 unemployment benefits have been overstated.
Double checking tax statements: On the one hand, it's good that people are checking their 1099-Gs.
You should take a look at all your tax statements to ensure that everything on them is correct, from your name, address, tax identification number (usually a Social Security number) and, of course, the amount you were paid.
Perhaps, as several of my pals on #TaxTwitter postulated, some folks questioning their payment totals just didn't realize how quickly unemployment can add up, especially when they likely were focused on paying overdue daily living expenses.
In these cases, the unemployment insurance (UI) recipients need to double check their other records. If it looks like the number on the 1099-G doesn't add up, or adds up to too much, they need to contact their state unemployment offices ASAP for an explanation or, if necessary, a corrected tax statement.
Such tax document discrepancies are a pain, but it's better to clear them up before you file. That way you avoid the IRS coming back with a notice saying your return and the copies of your income the agency got can't be reconciled.
Unemployment ID theft: But what if you get a 1099-G for unemployment benefits and you never applied?
You could be the victim of unemployment identity theft.
This happens every year. But 2020 was tailor made for such ID theft. Last year's historic levels of individuals who needed unemployment financial help because the coronavirus cut into their work hours or ended their jobs completely meant even more opportunities for crooks.
All they had to do was get their hands on your personal information and submit claims for the UI benefits. But instead of you getting the payments, the government financial help went to the thieves.
Now, however, it's the tax collector who's coming for you for the due taxes.
IRS aware, alerting states: With tax filing season 2021 about to start, the IRS is aware of this possibility. The agency noted late last month that, scammers also took advantage of the pandemic by filing fraudulent claims for unemployment compensation using stolen personal data of individuals who had not filed claims.
Payments made as a result of these fraudulent claims went to the identity thieves, and the individuals whose names and personal information were taken did not receive any of the payments.
The IRS issued guidance to state officials on identity theft and unemployment compensation reporting. Basically, the IRS told the state offices that no Forms 1099-G should be issued to those individuals the states have identified as ID theft victims.
But again, things slip through.
Convincing the state it wasn't you: If that happens/happened to you and you get/got a 1099-G for UI you never applied for or received, your first stop should be, again, your state's unemployment office.
Here in Texas, the Workforce Commission has a toll-free number to report form errors. Where identity theft is involved, the Lone Star State has a special UI Fraud Submission portal to provide documentation.
Ohio also has set up a telephone hotline and created a website for residents to report identity theft. Tens of thousands have already used it to let the state know they received a fraudulent 1099-G form.
"It's really easy for somebody to be like, 'This isn't my problem. They sent me the form, I've never been to Ohio.' Still, you need to take care of this," Thomas Betti, spokesman for Ohio's Office of Budget & Management, told the Associated Press. "Every unemployment system in the country is dealing with this massive amount of fraud."
Earlier this month, Rhode Island reported getting up to 1,000 complaints per day of UI fraud.
Regardless of where the identity theft and fraud occurred, note that the burden is going to fall on the wronged taxpayer to convince the UI office that he/she is the victim. Sorry, but any and every identity theft instance is a pain and it falls on the victims to proof that they are victims.
TaxTwitter again was on top of this. Thanks Brian Stoner, Phyllis Jo Kubey, Ed Zollars and Kevin Hayes for their interesting discussion on some of the complications of dealing with state unemployment offices when it comes to stolen identities and benefits.
File using correct earnings data: Once you do prove that you are indeed an ID theft victim, the state office should issue a revised form showing that you didn't receive unemployment benefits.
A corrected Form 1099-G showing zero unemployment benefits in cases of identity theft will help you avoid being hit with an unexpected federal (and possibly state) tax bill for unreported income.
If you can't get a corrected 1099-G in a timely fashion, the IRS says to go ahead and file your federal return reporting the accurate information; that is, enter only the income you did receive.
You might still have to deal with the IRS until you get the corrected 1099-G. But the documentation you used to clear up the matter with your state unemployment office can do double duty with Uncle Sam's tax collector.
You also might find these items of interest:
- IRS allows more truncated tax ID numbers
- Scammers target tax preparers in new EFIN phishing email
- Anyone now can get special IRS-issued PIN to thwart tax identity theft
I got a 1099-g form in the amount of $17,000 and then another one that said $19,000 and it said corrected and I'm a little confused will I get more money back like more money refunded to me?
Posted by: Michael kubica | Tuesday, April 20, 2021 at 06:35 AM
Can someone explain how to file a form for overpayment of unemployment I received a 1099-g from unemployment which is the correct amount the problem is unemployment is asking me to pay the funds all back? I appealed to the board and. was denied. this was the employer doing refuse to return to the job furlough. Anyway, If I am going to pay this large amount back should I need to pay taxes on it also? Is there some kind of form I need to get to show I am paying this money back although I didn't pay because I don't have any funds thanks russ
Posted by: RUSSELL BALLOG | Thursday, March 25, 2021 at 09:34 PM
Hey, taxpayer and all readers who are having issues with 1099-G amounts. I appreciate all y'all wanting the official word from Uncle Sam. I do, too, and I should have included the link to the IRS announcement. To be honest, I thought it was part of the one that went to state unemployment officials. My admittedly weak excuse is that I got overwhelmed with IRS documents! Again, my bad. I've now added the link to the IRS recommendation to filers to enter the correct information if your 1099-G is wrong. Here it is: https://www.irs.gov/newsroom/irs-offers-guidance-to-taxpayers-on-identity-theft-involving-unemployment-benefits -- It's in the 5th paragraph. Thanks for keeping me on my toes and thanks for reading! Kay
Posted by: Kay Bell | Sunday, February 21, 2021 at 11:36 AM
"IRS says to go ahead and file your federal return reporting the accurate information..." It would be nice if you cited a specific IRS press release or URL to document this.
Posted by: taxpayer | Sunday, February 21, 2021 at 10:18 AM