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NYS Unemployment Fraud: Take Caution

As the United States faced the COVID-19 pandemic, enhanced unemployment benefits were given in an attempt to keep as many people home as possible. Recently, there has been a spike in reported unemployment fraud as several individuals have taken advantage of the system and illegally collected benefits in the name of other individuals. We have seen an increase in this due to the methodology of rolling out form 1099-G, which details how much individuals received in unemployment benefits.

In previous years, form 1099-G would be mailed to those who are claiming unemployment benefits, the form would then be given to your accountant who would use the information to file your return correctly. However, since Form 1099-G was not supplied to taxpayers this year there are many discrepancies being seen upon filing. NYS may send you a letter saying you underreported your earnings due to one of two very common issues seen this year:

  1. Unemployment benefits were collected by the taxpayer and not reported to taxing entities
  2. Unemployment benefits were collected by someone else under your information this year

Both cases will cause NYS to send correspondence relating to the unreported amount. If you receive a letter from New York, detailing this you should look to consult with your accountant as soon as possible to rectify the situation.

Recent Story of $1.9 Million Fraud Scheme

An example of unemployment benefit fraud can seen in a developing case where defendant Yohauris Rodriguez Hernandez was arrested for participating in a scheme to claim these benefits. U.S. Attorney Damian Williams had this to say on the situation, “As alleged, the defendant participated in a scheme to fraudulently obtain COVID-19 unemployment benefits under the names and social security numbers of at least 100 other people, which attempted to steal more than $1.9 million and resulted in the fraudulent disbursement of more than $500,000. The defendant is now in custody and facing serious federal charges.”

How Does Unemployment Fraud Happen?

Unemployment fraud happens when fraudsters use real identities, likely stolen during previous data breaches from banks, insurance companies, and major employers to file fraudulent claims. These claims are typically filed on behalf of individuals who are currently employed, as they will not have an active claim.

If an active claim were already in the system, the criminals would not be able to file another fraudulent claim which would lead to a red flag being drawn. It is also important to note that New York State has recently issued a fraud alert on “Return to Work Credit Bonus” emails, that are ultimately being sent to steal your personal information and ensure fraudsters do not raise a red flag with conflicting claims.

If you receive or have received communications from the Department of Labor regarding unemployment benefits you did not apply for, you may be the victim of unemployment benefits fraud and identity theft. Official communications include, but are not limited to, emails, text messages, letters, debit cards, and tax forms received by mail. If you receive or have received these, it is pertinent that you immediately report the suspected fraud to the Department of Labor.

What to Do After Reporting to the DOL

After you have reported the fraud to the department of labor, there are still additional steps to be taken such as changing your passwords and PINs for online accounts, filing a report with your police department, and reporting a misused Social Security number. Additionally, you will likely continue to receive mail, emails, and texts regarding unemployment benefits after the report has been filed. While fraudulent claims are stopped immediately, communications may continue for weeks or months later. You will not need to report the additional communications received.

Have you received correspondence from the state related to this?  Feel free to give us a call at 516-541-6549. And don’t forget to visit our website for more news updates!

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