Avoiding Imposter Unemployment Claims

Unemployment fraud is rising within the U.S. with $63 billion known dollars in improper unemployment claims made in 2020. A watchdog organization for the U.S. Department of Labor believes much of the fraud is coming from perpetrators, sometimes in other countries, who steal personal identity information on the dark web, and then flood state unemployment systems with false claims.

The alleged fraud accounts for nearly 10% of total paid out unemployment in the U.S. since COVID-19 began. California is currently the largest target, with an estimated $11 billion in unemployment fraud. Colorado comes in 2nd, with an estimated $6.5 billion in fraud.

This also comes as at least one million Americans had filed for unemployment every week for 46 straight weeks by Feb. 2021. Due to the COVID-19 pandemic, the U.S. is also currently offering an additional $300 in federal unemployment benefits per week, on top of state’s $600 in benefits.

Detecting Unemployment Fraud
False unemployment claims are usually detected when a company’s HR department receives the unemployment notifications from a state agency—as the employee in question is still gainfully employed.

Other times the fraud is noticed when a worker receives a 1099-G form at the end of a tax year saying they filed for unemployment, when in reality, they never applied for jobless benefits.

Reporting Fraud
If someone in your organization finds out they are a victim of an imposter unemployment claim, the alleged fraud should be reported by the employee—not the organization. That’s because during the reporting process, information will be asked that only the affected employee will be able to access.

You can help the affected employees by offering them these reporting steps:

  • Report the incident to this IRS website, which is managed by the Federal Trade Commission.
  • Contact your local police department and file a report (when possible).
  • Report the incident to your state’s unemployment agency.
  • Place a freeze alert on your credit record with the following credit bureaus: Equifax, Experian, and Transunion.
  • Order a free credit report.
  • Contact your financial providers (bans, credit card companies, etc.) to flag irregular transactions.

Steps to Avoid Unemployment Fraud
We recommend the following measures to try to curb unemployment fraud within your organization:

  • Notify your teams about the rise in unemployment fraud and advise them to notify their manager or HR representative if they suspect any fraud.
  • If you receive an unemployment claim from someone who still works in your organization, notify them as soon as possible.
  • Train your HR department to be aware of the increase in fraudulent claims.
  • Remind your entire staff to protect personal data, including names, birthdays, and addresses. Unfortunately, these three pieces of information may be all someone needs to file a fraudulent claim.
  • Advise your employees to not share their COVID-19 vaccination cards online, as these cards may contain a date of birth and employees’ full legal name.

Following Reporting Fraud
After a worker reports potential unemployment fraud, they may receive a 1099-G tax form for the benefits claimed using their Social Security number. If for some reason the employee does not receive the form, they should request  a 1099-G Review according to instructions provided by each state.

If your employee already received an actually 1099-G form for the unemployment claim you didn’t report, then advise them not to report any benefits on their taxes that they didn’t actually receive.

Those employees should also request a corrected 1099-G Review form. If your state agency doesn’t respond before Tax Day, the employee should still file their taxes, but only report the income they received.

Overall Prevention
By taking these steps, your organization will be actively prepared to help employees if a false unemployment claim is filed for someone in your organization. With fraudulent cases growing each day, sometimes the crime is unavoidable, but the damage can hopefully be minimized through these proactive measures.

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