IRS anticipates many taxpayers unknowingly hit by unemployment benefit theft

HOUSTON - The IRS started accepting tax returns today, but some tax refunds could be delayed due to widespread unemployment benefit theft. The IRS says it anticipates many people have been hit but don't know it. 

You'll know you're one of them if the Texas Workforce Commission sends you an unexpected 1099-G form for unemployment benefits. Or the IRS notifies you that you didn't report unemployment benefits, but you never applied for any. That means a thief claimed benefits in your name. 

"It was a substantial amount and knowing there are families out there who could actually use these funds," said Brandi Wallace. 

Wallace is one of tens of thousands of Texans who discovered an identity thief applied for unemployment insurance in their names. She says it happened even though she's still working. 

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"That was definitely the first red flag. Before then, I didn't receive anything at home or anything in the mail 
stating that I had filed myself," said Wallace.

The U.S. Department of Labor estimates $63 billion in improper unemployment payments have been paid during the pandemic.

"They filed in many states fraudulent claims for unemployment benefits and the taxpayer doesn't know," said IRS spokesman Michael Devine.

The Texas Workforce Commission says it flagged 292,000 unemployment claims as suspicious for ID theft.  It says it stopped many, but 1.2% of benefits paid have been fraudulent.  

"Businesses or individuals who have received correspondence from TWC when no claim has been filed should report it through our fraud submission portal, located at our home page at TexasWorkforce.org," said TWC spokesman Cisco Gamez. You can also email TWC.fraud@twc.state.tx.us or leave a message at the TWC Fraud Hotline at (800) 252-3642.

Devine says impacted taxpayers can still file their tax returns, but should report their correct income and note that they received a 1099-G in error. 

"The IRS knows this a problem, so we might be able to fix it. But if not, you'll get a letter in the mail, or a notice from the IRS that you failed to claim income. And that's when you can contact the IRS and explain the situation and we're going to fix it and make it alright," said Devine.

The IRS offers a Guide to Unemployment Related Identity Theft.

If you are a victim of unemployment benefit fraud, TWC provided these answers to common questions:

•    Are you responsible for paying back the money lost when you didn’t receive it?
If TWC has confirmed an individual’s identity has been stolen in connection with a fraudulent claim, the individual will not be responsible for the fraudulently obtained benefits.  Individuals should report suspected identity theft to TWC by following the guidance on TWC’s Reporting Fraud webpage (https://twc.texas.gov/reporting-fraud) so TWC can investigate.  

If, after identity theft has been confirmed, an ID theft victim receives an overpayment notification, they should reach out to TWC’s Identity Theft unit at IDTTF@twc.state.tx.us so we can resolve the issue. 

•    What other steps should a person take if they suspect identity theft fraud and have already reported fraudulent activity to TWC? Should they report fraud to their local law enforcement agency?

1.    Contact the Police department in the city in which you reside and get an incident report and number. 
2.    Consult the Federal Trade Commission website (checklist of further actions is available on this site)
3.    Contact one of the three credit reporting agencies listed below, and:
•    Ask that a free fraud alert be placed on your credit report.
•    Ask for a free credit report (you only need to contact one of the three agencies because the law requires the agency to contact the other two.)
•    If needed, ask to have your credit account frozen.
o    Equifax - 800-349-9960
o    Experian - 888-397-3742
o    TransUnion - 888-909-8872
4.    If bank or credit union account was compromised, contact the fraud department of each institution. Report the identity theft and, if needed, ask them to close or freeze the compromised account. 
If TWC has already established that you are an identity theft victim on your Unemployment Insurance (UI) claim and you need to provide identity verification documents, please visit the UI Fraud Submission portal (English), or UI Fraud Submission portal (Spanish) to provide your documentation. 

•    When you report fraud to TWC, should you expect to get a call, email or letter from TWC in response? 
Individuals who report suspected fraud to TWC do not always receive a call, email, or letter in response to the information provided.  TWC will only contact the complainant if we need clarification regarding the information provided.