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MNCPA PERSPECTIVES

Unemployment fraud: What to do if you receive an incorrect Form 1099-G

February 15, 2021  |  Carolyn LaViolette

Unemployment fraud: What to do if you receive an incorrect Form 1099-G Imagine going to your mailbox like any other day. Among the bills and magazine subscriptions, you find a tax form outlining your unemployment benefits and instructions to report the compensation on your tax return as income. Here’s the kicker: You didn’t file for unemployment and never received any benefits.

So, what gives?

Strange as it may sound, this scenario has been on the rise nationally and, unfortunately, is likely a sign of unemployment insurance fraud.

The FBI in a June news release stated there has been a spike in fraudulent unemployment insurance claims complaints related to the ongoing COVID-19 pandemic. It appears scammers are taking advantage of the increased number of claims submitted and filing fraudulent ones under stolen identities. Scammers make away with the check, and victims are left with a tax form and instructions to report the compensation as taxable income.

Ignoring the tax form and calling it a day isn’t an option. Doing so could land you in hot water with the IRS and result in a bigger tax burden for underreporting your income. Instead, the IRS instructs taxpayers who receive Form 1099-G for unemployment benefits they didn’t receive to contact the issuing state agency. A revised form will be issued showing the correct amount — even if that amount is $0 — to help avoid an unexpected federal tax bill.

The Minnesota Department of Revenue shared the following state-specific steps to take if you’re subject to unemployment insurance fraud:
  • Contact Minnesota Unemployment to report the possible unemployment insurance fraud.
  • Request a revised Form 1099-G showing you didn’t receive unemployment benefits.
  • Keep the revised Form 1099-G for your records.
If taxpayers cannot get a corrected Form 1099-G before filing their tax return, they should still file an accurate return only reporting the income they received.

Overall, when it comes to identity theft and fraud, the best advice is to report it quickly. Fast action means you’ll only pay tax on the compensation you received, and scammers will no longer receive benefits under your name.
 

Topics: Taxation-Individual, Fraud

Carolyn LaViolette

Carolyn LaViolette is the MNCPA communications manager, working to enhance members’ professional reputations through content, media relations and public affairs. She is also the MNCPA’s unofficial pianist and has tickled the ivories at multiple MNCPA events. Outside of her love for writing and music, Carolyn spends her time playing with her two daughters, attending Tommie football games with her husband, and memorizing the lyrics to musicals. If you can’t get tickets to Hamilton, she is happy to sing the soundtrack for you. Carolyn can be reached at 952-885-5530 or claviolette@mncpa.org.

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