Help Your Clients Combat Unemployment-Related Identity Theft

Form 1099-G is used by states to report unemployment compensation to taxpayers and IRS. In 2020, many taxpayers received Forms 1099-G for compensation they did not receive. The U.S. Department of Labor has estimated that approximately $89 billion in unemployment compensation was lost in 2020 due to fraud.
Here are a few steps you should take to help clients who are victims of unemployment compensation fraud:

  • File a Form 14039, Identity Theft Affidavit, only if an e-filed tax return rejects because your client's Social Security number has already been used. Do not file IRS Form 14039 to report unemployment compensation fraud to IRS.
  • Report the fraud to state agencies, and request a corrected Form 1099-G.
  • File a tax return reporting only the actual income received, even if your client hasn’t received a corrected Form 1099-G. State agencies may not be able to timely issue a corrected Form 1099-G.
  • Recommend that your clients get an IRS Identity Protection PIN (IP PIN) to protect their Social Security numbers.
  • Your business clients can also fight unemployment compensation fraud by responding quickly to state notices about employees filing jobless claims, especially when they have no record of those employees.

Learn more about how to protect your clients from unemployment-related identity theft here.