Identity theft and form 1099-G

Your Guide to State, Local, Federal, Estate + International Taxation

During COVID, millions of Americans lost their job or worked fewer hours, prompting many to apply for unemployment benefits. During tax season, people received form 1099-G from their respective states presenting the amount of unemployment benefits they received in 2020. Some people received a 1099-G, but had not applied or received unemployment benefits. The IRS is asking that you contact your appropriate state agency to report inaccurate 1099-G forms, as this is evidence of identity theft.

Don’t miss: How many people really file estate tax returns?

States issue form 1099-G to the taxpayer and the IRS to report taxable income, such as unemployment benefits or refunds issued by state agencies. Unfortunately, scammers have taken advantage of the pandemic by filling fraudulent claims for unemployment benefits using stolen personal information of taxpayers who have not claimed unemployment benefits. Thus, the unemployment benefits went to the scammer. and the taxpayer whose personal information was stolen did not receive any of the payments.

If you received form 1099-G but did not receive unemployment benefits, don’t just assume this notice was a mistake. The IRS has asked you contact the issuing state agency to request a revised 1099-G. A revised 1099-G will show no unemployment benefits received. If a taxpayer was unable to receive a timely and corrected 1099-G, they should have filed their tax return based on what their actual income was. A corrected 1099-G form accurately reports your taxable income to the state, as well as to the IRS. This will help you avoid any notices and/or unexpected federal/state tax bills for unreported income.

The IRS has provided information on the signs of identity theft, as well as general steps that should be taken (Taxpayer Guide to Identity Theft). Please note that you are not required to file form 14039 (Identity Theft Affidavit) with the IRS regarding an incorrect 1099-G. The identity theft form should only be filed if during the electronic filling process the tax return is rejected due to using a Social Security Number that has already been used on a filed return.

The Arizona Department of Revenue has also provided tips for protecting your identity (Identity Theft – Protecting Your Identity).

As a reminder, if you received unemployment benefits report these benefits on your tax return. Unemployment benefits are considered taxable income. The unemployment benefits is found in box 1 and any federal income tax paid is shown in box 4 of form 1099-G.

If you have any questions, please contact your Henry+Horne advisor. For more information and resources on COVID-19, see our coronavirus page.