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Got a Fraudulent Form 1099-G Unemployment Benefit?

Updated: Feb 1, 2023

2021-March 13th

One of the hardest things for me to get my little brain around is the mentality of a person who commits wanton fraud.  I can understand the motivations of an employee who embezzles from their employer.  (I do not like nor agree with their reasons, but at least they have tried to justify their actions based upon a grievance or something.)  But people who make a living committing wide-spread fraud, how they can justify their actions is beyond me.

One recent fraud this year, has been a widespread issue of folks filing false unemployment claims. Heck! I even had somebody file one on me last year. I caught it and had it stopped real fast, but I’m now seeing several clients coming in to have their tax returns prepared, who received that infamous form 1099-G from the State Unemployment Office and they were never unemployed last year.

Usually, the amounts on that form are $8,000-$15,000!!! Try adding that onto your taxable income and see what happens to your tax. Not fair they claimed. And then they asked me how to avoid reporting it. My standard answer was, “The IRS got the form and is expecting it to be reported or they will send you a nasty notice with a recomputed tax due if you don’t.”

I then send them straight to the Unemployment Office (by phone since COVID restrictions prevent in-office visits). They need to provide proof that they were never unemployed during 2020. The best thing to have handy is a statement from your employer attesting to that. You could also show them your signature and have them look at the one used in the fraudulent application. Most fraudsters are not smart enough to obtain a copy of your official signature and use that. Once you have adequately established that you never received those unemployment benefits, demand that they issue a corrected form 1099-G showing ZERO benefits.

Now, we’re are dealing with an overwhelmed government agency here. They may eventually get around to issuing a corrected 1099-G, but I wouldn’t hold my breath waiting for that to happen. In the mean time, you might need your tax refund and this is holding it up. You could report the benefits in the proper spot on your form 1040, then on the Other Income line, subtract them out, attaching a statement that you never received those benefits and the Unemployment Office has been informed but you never got a corrected 1099-G by the time of your fling.

Believe it or not, the IRS is aware that there were A LOT of fraudulent unemployment claims made in 2020. One rumor running around is that the Russian Mafia did it. (Sure! Blame it on the Russians! They seem to get blamed for everything these days.) So, if you do end up filing with the corresponding subtraction on the OTHER INCOME line, there is a good chance that the IRS will believe you. In fact, this is the perfect year to have all kinds of problems and beg the IRS to be lenient. Just say the new magic password to the IRS… “COVID.”

Did you hear? Prov 11:21 says, “Most certainly, the evil man will not be unpunished, but the seed of the righteous will be delivered.”

Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com Also on Facebook.

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