SACRAMENTO, Calif. — The Dollars and Sense team has been reporting on unemployment fraud since it first started coming to light. Now tax time is here, and a viewer named Brian Sanders texted us wondering what happens if someone has a fake claim opened in their name. Would they be on the hook for taxes?
Here’s what you need to know.
First, there are no state taxes on unemployment benefits in California, but they are subject to federal taxes. That includes standard unemployment benefits, Pandemic Emergency Unemployment Compensation (PEUC), Pandemic Unemployment Assistance (PUA), and FED-ED.
The same goes for the $600 and $300 temporary bumps that were handed out in 2020.
The Employment Development Department (EDD) began issuing 1099-G forms by mail and electronically in UI Online accounts in January. Those forms should be filed with federal tax returns.
If you get one but didn’t collect unemployment in 2020, your identity likely has been used by an imposter to file for benefits. Congressman Josh Harder (D-CA 10th District) is concerned by what that could mean for thousands of Californians.
“The (EDD) has been utterly incompetent at distinguishing between people who lost their job and need unemployment benefits to survive, and outright fraudsters who are trying to scam the government,” Harder told ABC10, referring to the agency’s widely reported problems.
“What's worse is innocent people who have had their identity stolen, and may not even know it yet, could be hit with a tax liability over the next couple of months for those benefits that they never received in the first place.”
That led Harder to write a letter to the Commissioner of the Internal Revenue Service.
“We want to make sure that they're working with state agencies like California unemployment, so they can get an accurate accounting of what's real and what's not,” he said.
If you think you’re the victim of identity theft involving unemployment benefits, the EDD has a form for reporting it.
People can call 1-866-401-2849 for help getting a corrected 1099G. The EDD says they’ve added about 10 times the number of people to help answer questions and provide assistance this year.
Claims found to be fraudulent will be removed from the victim’s social security number and an amended 1099G will be issued by the EDD.
The IRS says that people who can’t “obtain a timely corrected form” from the EDD “should still file an accurate tax return, reporting only the income they’ve received.”
Got questions? Send them to the Dollars and Sense team by texting 916.321.3310.