Taxpayer Identity Theft Concerns Involving Unemployment Benefits
During the COVID-19 pandemic, the IRS has noticed increased cases of identity thieves fraudulently filing claims for and receiving unemployment benefits on behalf of taxpayers. These taxpayers are now receiving Form 1099-G, Certain Government Payments, showing an amount of taxable unemployment benefits they never received. On January 28, 2021, the IRS provided guidance for taxpayers who find themselves in this circumstance.
Taxpayers who were incorrectly issued Form 1099-G for unemployment benefits they did not actually receive should contact the issuing state agency to request a corrected Form 1099-G showing zero unemployment benefits. Failure to do so may result in the taxpayer receiving an unexpected federal tax bill for unreported income. The taxpayer does not need to file Form 14039, Identity Theft Affidavit, which should only be filed if a taxpayer’s federal income tax return has been rejected because another return was already filed using the same Social Security number.
After the request is received, the state will send the corrected Form 1099-G to both the taxpayer and the IRS. In cases where a taxpayer does not receive a timely, corrected form from the state, the taxpayer should still file an accurate tax return only reporting income actually received.
As a reminder, if you did receive unemployment benefits, the amount should be included in taxable income on your federal income tax return.
Identity theft continues to be a growing concern. See this BKD Thoughtware® article to learn more about the IRS Identity Protection PIN Opt-In Program and the recent expansion of the program to all eligible taxpayers. An Identity Protection PIN is a six-digit number that prevents someone else from filing a tax return using a taxpayer’s Social Security number.
If you have questions or need assistance, reach out to your BKD Trusted Advisor™ or submit the Contact Us form below.