COVID Tax Tip 2021-24, February 24, 2021
The IRS urges taxpayers whose identities may have been used by thieves to steal unemployment benefits to file a tax return claiming only the income they actually received.
In 2020, millions of taxpayers were affected by the COVID-19 pandemic through job loss or reduced work hours. Some taxpayers applied for and received unemployment compensation from their state. By law, unemployment benefits are taxable.
Scammers also took advantage of the pandemic by filing fraudulent claims for unemployment compensation
using stolen personal information of individuals who had not filed claims. Payments made as a result of these fraudulent claims went to the identity thieves.
Taxpayers who receive an incorrect Form 1099-G should contact the issuing state agency to request a revised form. If they’re unable to get a timely, corrected form from states, they should still file an accurate tax return, reporting only the income they received. They should save whatever documentation they have regarding their attempts to receive a corrected form from their state agency.
What people should if they think they might be an identity theft victim
People should visit Identity Theft Central for more information about the signs of identity theft.
Taxpayers do not need to file a Form 14039, Identity Theft Affidavit, with the IRS about an incorrect Form 1099-G. An affidavit should only be filed only if the taxpayer’s e-filed return is rejected because a return using the same Social Security number already has been filed.
If a taxpayer is concerned that their personal information has been stolen and they want to protect their identity when filing their federal tax return, they can request an identity protection 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.
States should not issue Forms 1099-Gs to taxpayers they know to be victims of identity theft involving unemployment compensation.