With guest writers, Cassandra Baubie, JD, Senior Associate, HBK CPAs & Consultants
Suzanne Leighton, CPA MST, Senior Manager, HBK CPAs & Consultants
As COVID-19 raged in 2020 and unemployment soared to record highs, the federal government increased unemployment benefits through the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. While the additional benefits provided much-needed relief to millions of workers who’d lost their jobs to the pandemic, they also attracted scammers who began filing fraudulent claims. Their tactic: using personal information stolen from individuals who had not filed claims. The payments went directly to the identity thieves, the fraudulent practice coming to light only after the individuals whose identities had been stolen began receiving 1099-G forms identifying the amounts that had been doled out in their names. Starting in January of this year, thousands of taxpayers who did not receive the associated payments began receiving state-issued Form 1099-Gs.
While the Internal Revenue Service (IRS) has put fraud detection at the forefront, state agencies have yet to dedicate a great deal of resources to the problem. It is believed that one major hindrance to the ability of states to combat wide-scale fraud is that their current security measures are focused more on individual taxpayer misappropriation of funds and individual taxpayer qualifications. That, combined with the influx of taxpayers taking advantage of their states’ unemployment systems, created the perfect environment for fraud. Indeed, COVID-19 and the related increase in unemployment claims have highlighted the lack of cybersecurity measures at the state and federal levels.
The IRS urges any taxpayer who receives a Form 1099-G for unemployment benefits they did not receive to contact the unemployment agency for the state issuing the form and report the fraud and to request a corrected 1099-G. Report according to the following reporting procedures:
Ohio
Report suspected fraud to Ohio’s Benefit Payment Control section by calling the toll-free hotline at 1-800-686-1555 (Option 1), by faxing the information to 1-614-752-4808, or by clicking on any REPORT FRAUD link on the agency’s website.
Pennsylvania
Report unemployment fraud online to the Pennsylvania Department of Labor or call the Fraud Hotline at 1-800-692-7469. Also, file a police report with the municipality you resided in at the time the unemployment benefits in question were paid. A copy of the police report must be provided to the Office of Unemployment Compensation.
New Jersey
New Jersey has several ways to report fraud: by phone, call 609-777-4304 or online.
Florida
Report Reemployment Assistance fraud online, or by calling 1-833-FL-APPLY (1-833-352-7759).
About the Author(s):
Cassandra Baubie, JD is a Senior Associate at HBK CPAs & Consultants and is a member of its Tax Advisory Group (TAG). She works in the firm’s Youngstown, Ohio office. She focuses on issues pertaining to state and local taxation (SALT), as well as flow-through entity taxation. She has been involved in numerous sales and use tax, franchise tax, and corporate income tax audits, VDAs, and refund requests. She can be reached at 330-758-8613, or by email at cbaubie@hbkcpa.som.
Suzanne P. Leighton, CPA, MST is a Senior Manager in the Pittsburgh, Pennsylvania office of HBK. She has extensive experience in state taxation and pass-through entities. She is a member of the HBK’s Tax Advisory Group. Suzanne can be reached at 724-934-5300, or at sleighton@hbkcpa.com.
