How Identity Theft can Lead to Unemployment Fraud

  • By David Lukic
  • Apr 13, 2021

 2020 and the pandemic brought with it a flurry of fraudulent activity affecting various targets to steal money and personal information for identity theft. One group hit hard by these tactics was unemployment recipients.

According to the IRS, organized crime rings are using unemployment to steal credentials and other information like names, social security numbers, phone numbers, bank account details, credit cards, debit cards, and dates of birth for fraud and identity theft.

Many of the unemployment fraud victims’ information was stolen in previous data breaches, and then used to file for unemployment benefits by scammers. These types of benefit payment attacks are occurring all over the country.

unemployment fraud

Signs that You are the Victim of Identity Theft

Unemployment is taxable income, and therefore, the IRS issues you a state 1099-G tax form at the end of the year. If you never filed for unemployment benefits but received one of these in the mail, you could be the victim of identity theft.

Some other things that may indicate you are a victim of identity theft and someone other than you have filed for unemployment insurance benefits in your name include:

  • You receive a notice or official letter from the IRS, U.S. Department of Labor, or another government agency about your unemployment benefits. 
  • You receive a 1099-G tax form that states you earned income in another state.
  • Your employer asks you about an unemployment compensation verification letter they received from the government.

How to Report Unemployment Fraud

It is imperative to report identity theft if it happens to you. The U.S. Department of Labor provides step-by-step instructions on how to report fraud regarding unemployment benefits and a directory to find the right office to report it to.

Report Benefits Fraud to the State Where the Fraud Occurred

First, you must report unemployment fraud to the state where the fraud occurred. Some things to remember from the DOL are: 

  • “You may not receive immediate confirmation from the state when you submit a report. Time estimates for how long this process takes vary by state.
  • The state may require additional documentation (like filing a police report or a sworn affidavit) in order to open an investigation; they will review your case and make a determination. Each state law has different requirements and a different process for investigating identity theft and reporting fraud.
  • If you received a 1099-G tax form for benefits you didn’t receive, the state will need to issue you a corrected 1099-G tax form and will update the tax record with the IRS on your behalf.”

Be Sure to Report Your Correct Income on Your Taxes

When you file your taxes, don’t wait for a new 1099-G or updated information; file them using your correct income according to your records. Tips from the IRS fraud department and DOL on that are:

  • “The processing of your tax return should not be delayed while your report of unemployment identity theft is under investigation.
  • If you have not filed your taxes yet, do not report the incorrect 1099-G income on your tax return.
  • The American Rescue Plan of 2021 provides for a one-time exemption of $10,200 per person in unemployment benefits to individuals and couples who earned $150,000 or less last year. If you have already filed your taxes, do not file an amended return. The IRS will issue additional guidance.
  • There is no requirement to file a Form 14039, Identity Theft Affidavit. A Form 14039 should be filed only if the taxpayers’ e-filed tax return is rejected because a duplicate return with their Social Security number is already on file or if the IRS instructs them to file a Form 14039.
  • If you have already filed your taxes, do not file an amended return. The IRS will issue additional guidance regarding your next steps. Refer to the Identity Theft and Unemployment Benefits  page on IRS.gov for updates and additional tax filing information.”

Sign Up for the IRS Identity Protection PIN Program

Anyone who is a victim of identity theft should participate in the IRS PIN program to prevent anyone from filing tax returns on their behalf. Income tax fraud is another very serious issue right now. The PIN program assigns you a six-digit pin, and no one can file in your name without it. You can sign up for a tax fraud alert here Get an IP PIN.

Get a Copy of Your Credit Report

The next step is to check your credit report to look for any suspicious or unauthorized activity. You should contact each of the three big credit reporting agencies (Equifax, TransUnion, and Experian). You can order a free copy online (free every 12 months). You will need to verify your identity when calling, so have your name, social security number, date of birth, and other details ready. Ask to have a fraud alert added to your credit file. 

Report Fraud to the U.S. Department of Justice’s National Center for Disaster Fraud

To help the country as a whole deal with identity theft and unemployment fraud, you should also report the incident to the U.S. Department of Justice’s National Center for Disaster Fraud. They, in turn, will share the information with the U.S. Department of Labor’s (DOL) Office of Inspector General. You can also contact your local attorney general and report the unemployment insurance fraud as well.

You should also contact the FTC (Federal Trade Commission) and report identity theft to them. You can file as a claimant online or by phone.

Contact local law enforcement to report any unemployment claims that you did not initiate.

report unemployment fraud

How to Protect Yourself from Unemployment Fraud

The Department of Justice issued a warning to folks about fake state workforce agency (SWA) websites designed to look like unemployment benefits portals. Typically, fraudsters use text messages or phishing emails to lure people in, hoping they will click the link and land on the website, then fill out a form using personally identifiable information. These are scams just waiting to collect your data for identity theft and unemployment fraud. Some tips to avoid unemployment fraud are:

  • Never click links in text messages or emails when they come in unsolicited.
  • Use common sense, and if something sounds too good to be true, it probably is.
  • Always protect your social security number and date of birth.
  • Never enter personal details online without verifying the URL and making sure the connection is encrypted.

About the Author
IDStrong Logo

Related Articles

4 Most Common Bitcoin Scams

Scams are creeping into all areas of life these days. Any new type of technology is at risk. Bitco ... Read More

Romance Scams, The Love to Escape from

Scams have been around a long time, that’s nothing new. One of the most disturbing and heartbrea ... Read More

Top 6 Craigslist Scams and How To Avoid It

Craigslist is a website used for localized classified ads. It was founded in 1995 by Craig Newmark ... Read More

Common PayPal Scams & How to Prevent Them

PayPal is one of the top digital currency exchanges in the world. Most everyone has heard of PayPa ... Read More

The Emergence of Cash App Scams

Peer-to-peer payment apps are all the rage these days. People use them for swapping money back and ... Read More

Latest Articles

Misconfigured Database Spurs Theft of 63 Million OneMoreLead Records

Misconfigured Database Spurs Theft of 63 Million OneMoreLead Records

OneMoreLead, a business-to-business (B2B) marketing enterprise, suffered a significant data breach late last year. The marketing company left a database misconfigured, prompting the unintentional leaking of 63 million records. 

How to Prevent Data Loss from a Phone Scam

How to Prevent Data Loss from a Phone Scam

When you think of scams, you probably think of them as someone trying to trick you out of money. While data loss is typically not the primary goal of a scam, it can be the outcome.

UNM Health Data Breach

UNM Health Data Breach

The personal information of nearly 700,000 individuals was stolen in a data breach at the University of New Mexico Health. The data breach was revealed in the second half of 2021.

Featured Articles

How to Buy a House with Bad Credit

How to Buy a House with Bad Credit

Buying your own home is the American Dream, but it might seem out of reach to those with bad credit. However, the good news is, if your credit is less than perfect, you do still have options and in most cases, can still buy a home.

How Secure Is Your Password? Tips to Improve Your Password Security

How Secure Is Your Password? Tips to Improve Your Password Security

Any good IT article on computers and network security will address the importance of strong, secure passwords. However, the challenge of good passwords is that most people have a hard time remembering them, so they use simple or obvious ones that pose a security risk.

Top 10 Senior Scams and How to Prevent Them

Top 10 Senior Scams and How to Prevent Them

Senior scams are becoming a major epidemic for two reasons. First, seniors often have a lot of money in the bank from a life of working hard and saving.