1099G Received (Identity Theft Situation)

[msustu]

Hi,

My wife received a 1099G for unemployment benefits that she never filed for and never received. Last year around June 2020, my she received a notice from the unemployment agency concerning receiving unemployment benefits. She wasn’t unemployed and had never filed for any sort of benefits so she thought this must be a mistake. She then received an email from the HR department at her school claiming that unemployment benefits had been filed in her name. She was instructed to file a fraud claim, which she did. Several months had gone by with no communication so she thought that it was resolved. She received another letter from the unemployment agency around October claiming they needed more information in order for the benefits to be paid out. Again she was never unemployed and never filed for unemployment benefits so she went online and filed a 2nd fraud claim. Once again, she never heard anything back. Then in January ‘21 she received a 1099–G form for $7458. She went online again to file a fraud and identity theft claim. We are told that we just have to wait for the agency to conduct their investigation. We need to get a corrected 1099-G form, but don't know if we ever will. Again, she was never unemployed, never filed for unemployment benefits, never received an unemployment payment, yet we are being taxed on benefits that were paid out fraudulently. There is no way we should be expected to pay taxes on something we never filed for and never received.

I'm told that we need to include the 1099G on our taxes or we'll get audited because a copy is sent to the IRS. How do we handle this situation, as I refuse to pay taxes on this? Sorry this is long-winded, but just wanted to make sure I put all of the facts in.

[DoninGA]

You need to speak to someone in your state unemployment department and find out why none of your fraud claims have been acted upon.

Go to this IRS website for unemployment benefit fraud - https://www.irs.gov/newsroom/irs-offers-guidance-to-taxpayers-on-identity-theft-involving-unemployme...

Taxpayers who receive an incorrect Form 1099-G for unemployment benefits they did not receive should contact the issuing state agency to request a revised Form 1099-G showing they did not receive these benefits. Taxpayers who are unable to obtain a timely, corrected form from states should still file an accurate tax return, reporting only the income they received.

[Carl]

This is more of a legal issue than it is a tax issue. I would highly suggest you seek legal representation, as we don't provide legal advice in this public forum.

[msustu]

Thanks for the response. We have submitted all of the necessary paperwork and requested a corrected 1099 back in January. We have since contacted the Michigan Unemployment agency and all they can do is confirm that it's being investigated. There's no way to get in touch with the actual fraud dept. We have been told that we just have to wait for the investigation to be completed.

I have been told by an accountant that I should enter the 1099G into my taxes and then enter an identical 1099, but this time putting a negative amount in so that they cancel each other out and shows $0 received. Does that make sense to you?

[BenT9]

You aren't having much luck with your state folks and most are inundated with questions re UC and can't respond fast enough.  I agree that if you omit it, you will probably get a notice from the IRS.  I suggest you input the 1099 G if your AGI  is less than $150,000.  Since your 1099 G amount is less than 10,200 and there is a $10,200 exclusion Schedule 1 on your return will show the unemployment and on the line below a negative entry to basically wipe out the unemployment and net it to "0" and have no effect on your taxable income or tax.  If your state doesn't exclude UC from tax this won't work since you might have state tax on  the UC received.  To be sure that there i no effect on your taxes I wold advise completing the return without the UC and looking at the amount of tax due or refund from the IRS and your state. Write them down.  Then input the 1099G look at Schedule 1 to see if the UC is offset by a negative entry on line 8.  Also look at your amount of tax due or refund from the IRS and your state.  If they are the same then you haven't incurred any tax on the inclusion of the UC.  If your tax due is higher or refund is lower it had an effect on you and you should wait for an amended 1099G that shows "0" income.  Lots of luck on that. 

[msustu]

Thanks for the response. We have taken the appropriate steps concerning the false unemployment situation.  With that said, it is a tax question. We received a 1099G for unemployment benefits that we did not actually receive. By law we need to include it in our taxes and I'm looking for advice on how to handle it.

[BenT9]

Sorry for my previous long-winded reply but here is more info.  You won't be audited if you omit the UC.  You will just get a letter from the IRS saying you missed including it and computing the tax on the UC.  At that time you can provide your info about the identity theft.  Maybe by then you will hear from your state.  If not you can explain your situation and they will probably accept your reasoning.    If your AGI is less than $150,000 (Line 11 form 1040) the $10,200 exclusion will insure you aren't paying tax on the UC.

[BenT9]

Not really.  As I noted the exclusion will get rid of the taxable income from the UC.  I don't know what he meant regarding entering a 1099.  My guess is that he recommended the same thing I did but it got misconstrued.

[BenT9]

If your AGI is less than $150,000 and you do as I advised your problem goes away.  If your AGI is over $150,000 and your tax is increased I would then go to Schedule 1 , Line 8 and add as an explanation "Identity Theft Erroneous 1099G"  and put in a negative equal to the UC on your 1099G.  The big issue in any case is was there tax withheld form the UC?  I assume not since a crook wouldn't want to reduce his fraudulent income by having tax withheld.  If it was withheld I would not use the tax when inputting the 1099 G.  The IRS might send you a notice giving you the benefit for the tax.  Then you can explain why the income wasn't yours.  I believe that these crooks could earn a legitimate living if they used the talents necessary to steal your wife's identity and get UC in legal employment.

[msustu]

Thanks for the information BenT9. He basically said said enter the same 1099G twice...the 1st time showing $7458 and the 2nd time using -$7458, thus zeroing it out.  You way makes sense and hopefully it all works out. The state agencies in Michigan are overwhelmed, but my wife filed a fraud case in June of 2020. There's no reason we should still be dealing with this. Again, thanks for your help.

[msustu]

Thanks, this was a big help. The main problem was when Covid hit, the state wasn't requiring people to prove their identity when filing for unemployment. You can obviously see the major flaw in that thought process. Every crook under the sun was filing tons of fraudulent claims. It took them a month or so to realize it was a mistake and starting sending out notices that you needed to verify your identity in order to continue receiving benefits. That's when my wife realized there was an issue (after receiving the notice). 

I agree with you in that if the crooks just put their talents to good use.  Again, I sincerely thank you for your help!

Cheers, Tom

[Marta1957]

im not of any help but i too have gone thru idetty thrft snce july!  i an not pying taxes on income i didnt incur.

how do correct my situation. ive been on the phone all day!

[Critter-3]

I would NOT enter the incorrect fraudulent 1099-G amount on the return EVEN if it will be excluded  if only not to legitimize the form in any way.  If you ever get an IRS notice in the future keep your fraud reports handy to refute the incorrect payment. 

[Marta1957]

im sorry but that method of dealingwith your 1099G sounds shady. i think and read we should get a with zero on it. and make a notation

[JotikaT2]

Please use the link below to contact the state agency as it applies to your 1099-G Form.

Contact information for 1099-G forms

Some states do have guidance to assist you if you erroneously received a 1099-G for unemployment that you never claimed or received.

@Marta1957