State governments have paid out more than $63 billion in erroneous or fraudulent unemployment claims since the start of the pandemic, according to the Labor Department inspector general.
When Congress expanded unemployment benefits and then extended them through coronavirus relief legislation, it created an opportunity for scammers and a difficult task for state governments. According to the Associated Press, fraud perpetrators (many of whom live in China, Nigeria, or Russia) buy stolen information on the dark web, such as addresses, birthdates, and social security numbers, and file unemployment systems with fake claims.
Many states have antiquated systems for processing unemployment claims and were unprepared to combat fraud while they paid out an unprecedented number of new legitimate claims at the same time. The Labor Department has set aside $100 million in support to states as they shore up their security systems and anti-fraud efforts. But in the meantime, it’s important for individuals and business owners to understand unemployment fraud and what role they can play in combating it.
What is unemployment fraud?
Generally, unemployment insurance fraud is when someone reports incorrect information in order to receive unemployment benefits to which they aren’t entitled. This can happen when an individual misrepresents the reason they are unemployed, applies for unemployment and doesn’t report additional income that would render them ineligible for benefits, or isn’t actually available or able to work. It can also happen when an individual’s identity is stolen and used to fraudulently apply for benefits.
What steps should individuals and business owners take to combat unemployment fraud?
- Report the fraud. In Florida, individuals who receive a check for unemployment benefits they didn’t apply for or business owners who have observed someone committing unemployment fraud can fill out a form to report the fraud. Check with your state’s labor department to find out about the process for reporting unemployment insurance fraud.
- Contact your state’s unemployment agency. If you receive a 1099-G tax form for unemployment benefits that you did not receive, contact your state’s unemployment agency and ask them to send a corrected, revised form that will reflect the correct amount provided to you. This may be difficult if you live in a state where the unemployment agency has been flooded with applications, so if you aren’t able to get a revised form by the tax filing deadline, the IRS indicates that you should simply file a return that accurately reflects the amount that you received.
- Strengthen your security. With so many people working from home, and with so many new systems to navigate, you may need to update your cybersecurity systems, or your employees may need additional training. On a personal level, stay vigilant with your passwords and continue to monitor your credit reports to check whether your identity has been compromised.
- Talk to your staff. Tell your staff about the wave of fraud, and ask them to stay in communication with you or your HR department if they suspect they have been a victim of identity theft or unemployment insurance fraud. If your team receives a notice from the state about a claim supposedly filed by a current employee, immediately notify that employee.