Guidance on Unemployment Benefits Identity Theft

The Arizona Department of Revenue (ADOR) advises taxpayers who receive a Form 1099-G from the Arizona Department of Economic Security (DES) for unemployment benefits they did not receive to contact the Arizona Department of Economic Security for a corrected form.

Form 1099-G for Arizona Unemployment Insurance (UI) or Pandemic Unemployment Assistance (PUA) benefits are sent to the taxpayer and the Internal Revenue Service (IRS) as the compensation is taxable income. Since the amount is reported on the federal income tax return, which is the starting point for Arizona income taxes, taxpayers also report the amount on the state individual income tax return. 

Unfortunately, some taxpayers have fallen victim to fraudsters stealing personal information and filing fraudulent claims for unemployment benefits. States across the nation have seen a significant surge in unemployment benefit fraud, largely in association with identity theft. There has not been a breach of information stored by DES. Rather, criminals are using phishing scams, previous corporate data breaches and other tactics to collect information from individuals across the country and file for UI and PUA benefits in their name.

Taxpayers who receive an incorrect Form 1099-G for UI or PUA benefits should contact DES to request a revised Form 1099-G showing they did not receive these benefits. DES will send a corrected 1099-G to the IRS and the taxpayer to adjust the unemployment compensation income. A corrected Form 1099-G showing zero unemployment benefits in cases of identity theft will help taxpayers avoid receiving an unexpected tax bill. The IRS advises that taxpayers who cannot obtain a timely, corrected form should still file an accurate tax return, reporting only the income they received. For more counsel from the IRS, click here.

Wednesday, February 17, 2021