During 2020, millions of taxpayers were impacted by the COVID-19 pandemic through job loss or reduced work hours. Some taxpayers who faced unemployment or reduced work hours applied for and received unemployment compensation from their state. As a reminder, unemployment benefits are taxable income and must be reported on tax returns.
Starting in January 2021, unemployment benefit recipients should have received a Form 1099-G, Certain Government Payments in the mail from the agency paying the benefits. The form shows the amount of unemployment compensation they received during 2020. In some states, taxpayers may be able to receive their Form 1099-G by visiting their state’s unemployment website where they signed up for account benefits to obtain their account information.
Unfortunately, scammers are taking advantage of the pandemic by filing fraudulent claims for unemployment compensation using stolen personal information of individuals who had not filed claims. Due to these fraudulent claims, payments went to the identity thieves. The individuals whose names and personal information were taken did not receive any of the payments.
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. It is important to note that individuals who a state has identified as ID theft victims should not have been issued Forms 1099-G.
Taxpayers who cannot obtain a timely, corrected form from states should still file an accurate tax return, reporting only the income they received. A corrected Form 1099-G showing zero unemployment benefits in cases of identity theft will help taxpayers avoid being hit with an unexpected federal tax bill for unreported income.
Taxpayers do not need to file a Form 14039, Identity Theft Affidavit, with the IRS regarding an incorrect Form 1099-G. The identity theft affidavit should be filed, but only if the taxpayer’s e-filed return is rejected because a return using the same Social Security number has already been filed.
Additionally, if taxpayers are concerned that their personal information has been stolen and want to protect their identity when filing their federal tax return, they can request an Identity Protection Pin (IP PIN) from the IRS. An Identity Protection PIN is a six-digit number that prevents someone else from filing a tax return using a taxpayer’s Social Security number. The IP PIN is known only to the taxpayer and the IRS, and this step helps the IRS verify the taxpayer’s identity when they file their electronic or paper tax return.
