Earlier this year, the League reported on a massive unemployment fraud scheme that diverted hundreds of millions of dollars intended for the unemployed into the hands of a well-organized fraud ring. An unprecedented number of consumers have been impacted across the country, including people living and working in Maine.
On Tuesday, Jen Burke, League Public Affairs and Communications Manager, spoke to WABI-TV about the potential tax implications this fraud scheme could have on Mainers. Because unemployment compensation is taxable under both state and federal tax codes, agencies like the Maine Department of Labor are required to issue 1099-G forms to individuals that received unemployment benefits. Unfortunately, these agencies are delivering forms to residents who did not apply for or receive benefits.
If a member contacts your credit union about receiving a 1099-G form for income they did not receive, you should encourage them to contact the agency that issued the form to request a correction. The Maine Department of Labor has created a dedicated page on its website for reporting this fraud.
Additionally, you should remind them to check their bank accounts regularly for suspicious activity. They also can place a freeze on their credit with the three major credit reporting agencies. The credit freeze will prevent unauthorized parties from accessing their credit reports. For more information, you can direct them to the Maine Credit Freeze Fact Sheet.
The Internal Revenue Service (IRS) also has issued guidance to help taxpayers. According to the IRS, taxpayers who are unable to obtain a timely, corrected form from states should still file an accurate tax return, reporting only the income they received. A corrected form showing zero unemployment benefits in cases of identity theft will help taxpayers avoid being hit with an unexpected federal tax bill for unreported income.
If your credit union has additional questions concerning this fraud scheme, please contact Ellen Parent, League Regulatory and Legislative Advocacy Coordinator, at firstname.lastname@example.org.