GOP Lawmakers Ask for Unemployment Insurance Fraud Protections
GOP Lawmakers Ask for Unemployment Insurance Fraud Protections
- AuthorsWenstrup, Rep. Brad R.Stivers, SteveSchweikert, Rep. DavidRice, Rep. TomHern, Rep. KevinChabot, Rep. SteveGonzalez, Rep. AnthonyLaHood, Rep. DarinDavidson, Rep. WarrenCline, Rep. BenWalorski, Rep. JackieBice, Rep. Stephanie I.Johnson, Rep. BillTurner, Rep. Michael R.Latta, Rep. Robert E.Balderson, Rep. TroyLaMalfa, Rep. DougEstes, Rep. RonFerguson, Rep. A. Drew, IVGibbs, Rep. BobSmith, Rep. AdrianCrawford, Rep. Eric A. "Rick"Perry, Rep. ScottFitzpatrick, Rep. Brian K.Guthrie, Rep. BrettCalvert, Rep. KenSmucker, Rep. LloydNunes, Devin GeraldJoyce, Rep. David P.Baird, Rep. JamesMiller, Rep. Carol D.Weber, Rep. Randy K., Sr.Dunn, Rep. Neal P.Jordan, Rep. JimReed, TomLamborn, Rep. DougArrington, Rep. Jodey C.Fulcher, Rep. RussLucas, Rep. Frank D.
- Institutional AuthorsU.S. House of Representatives
- Subject Area/Tax Topics
- Jurisdictions
- Tax Analysts Document Number2021-5070
- Tax Analysts Electronic Citation2021 TNTS 26-282021 TNTF 26-23
Wenstrup, Stivers Lead Effort to Help Victims of Unemployment Insurance Fraud
February 8, 2021
WASHINGTON, D.C. — Congressmen Brad Wenstrup (OH-02) and Steve Stivers (OH-15) led a group of 37 of their colleagues in asking the Biden administration to provide clarity, certainty, and relief to victims of Unemployment Insurance fraud during this tax filing season.
During the COVID-19 public health emergency, Congress enacted unprecedented relief measures to help Americans get by while businesses were shutting down. Among these measures were enhanced unemployment benefits for Americans who found themselves out of work.
With the new tax filing season set to begin on February 12, millions of Americans may soon be finding out that a fraudulent unemployment claim was made under their name. The Ohio Department of Jobs and Family Services (ODJFS) projects that tens of thousands of unemployment claims were filed fraudulently. In California, state officials have confirmed that approximately ten percent of unemployment benefits paid were fraudulent and are under investigation. Those benefits are estimated to be valued at more than $11 billion.
As unemployment benefits are taxable income, millions of Americans who have had unemployment benefits fraudulently claimed in their names will soon begin receiving their 1099-G tax forms provided by their states, as required by law. Currently, there are concerns as to whether states can investigate all claims of fraud and transmit the corrected Forms 1099-G to taxpayers before the April 15 tax filing deadline. In addition to the burdens on the state, finding out they may be victims of identity theft and fraud in the middle of an already complicated tax season will also place undue stress on people during a time when they can least afford it.
Reps. Wenstrup and Stivers's letter requests:
1. Extend the deadline by which states are required to submit Forms 1099-G for those under review for fraudulent activity (alleviate a state burden);
2. Implement a “hold harmless” process for those taxpayers whose 1099-G's are flagged as unreported income if those taxpayers believe they are victims of identity theft or fraud, such that no penalties or interest will accrue against them, to include issuing clear guidance to the taxpayer (alleviate a taxpayer burden);
3. Partner with those in the tax preparation community to help educate the public on the issue of identity theft involving unemployment benefits and to work with states to normalize procedures for identifying and verifying fraudulent cases (better message the issue to raise awareness); and
4. Track and report on the amount of fraudulent unemployment benefits that are removed from 1099-G forms due to fraud.
5. Finally, if there are regulatory or legislative barriers preventing them from doing so, we ask that they identify them so we can work on legislative solutions if needed.
“Congress acted swiftly and painted with a broad brush to address the COVID-19 public health crisis. Unfortunately, bad actors have taken advantage of the system and defrauded the federal government and millions of innocent Americans," said Congressman Wenstrup. "Investigating fraud claims takes time, and we must provide clarity, certainty, and relief to Americans who may be victims of unemployment fraud. We must also ensure state governments are able to work with the federal government to ensure Americans can file their taxes accurately and on time.”
“While the enhanced unemployment benefits authorized by Congress have been a lifeline for many Ohioans, they have also been an opportunity for cons who've taken advantage of this unprecedented situation to the tune of $330 million in our state alone,” said Congressman Stivers. “The last thing that families need as they are working to get back on their feet is to be hit with an astronomical tax bill that they did not incur, and state governments need time to fully investigate instances of fraud. The federal government has a responsibility to address the situation, and I stand ready to work with the Biden administration and my colleagues in Congress to do so.”
You can read the full letter here:
February 7, 2021
The Honorable Janet Yellen
Secretary
U.S. Department of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
Mr. Al Stewart
Acting Secretary
U.S. Department of Labor
200 Constitution Avenue, N.W.
Washington, D.C. 20210
cc: The Honorable Charles P. Rettig
Commissioner
Internal Revenue Service
1111 Constitution Avenue, N.W.
Washington, D.C. 20224
cc: Deputy Assistant Secretary Nancy Rooney
Employment and Training Administration
U.S. Department of Labor
200 Constitution Avenue, N.W.
Washington, D.C. 20210
Dear Secretary Yellen and Acting Secretary Stewart:
Throughout the COVID-19 public health emergency, the Internal Revenue Service (IRS) and the Department of Labor (DOL) have had to navigate unique challenges facing the agency and the American public, from administering new unemployment programs and Economic Impact Payments to extending the 2020 tax filing season by several months to accommodate the needs of the American people we serve. However, as the nation works to recover from this pandemic, we are increasingly concerned about the coming crisis for millions of American taxpayers who have had unemployment benefits fraudulently claimed in their names.
In response to the unemployment surge caused by the COVID-19 pandemic, Congress enacted the CARES Act, which greatly expanded unemployment insurance programs to help unemployed Americans. However, with these additional benefits came additional openings for fraud and identity theft. According to the Department of Labor's Office of Inspector General, the volume of fraudulent benefits could be as much as $36 billion. It has been reported in Ohio, for example, that “tens of thousands of those claims were filed fraudulently” throughout 2020, and it's estimated that “at least 166,000 claims were filed for unemployment insurance in 2020 without the supposed claimant knowing.” In California, state officials have confirmed that approximately 10 percent of unemployment benefits paid were fraudulent and are under investigation, valued at more than $11 billion. These numbers are expected to grow in the coming weeks, particularly as our constituents began receiving forms for the 2021 tax filing season. As you know, unemployment benefits are considered taxable income and must be reported on IRS Form 1099-G.
While this will already be an unprecedented filing season due to the economic recovery measures enacted throughout 2020, added burden of receiving a Form 1099-G for unemployment compensation a taxpayer may not have claimed places undue stress on our constituents at a time when many can least afford it. While we understand that Forms 1099-G are issued by the states and appreciate the guidance the IRS has issued to states and taxpayers regarding identity theft and fraudulent unemployment benefits, we believe the guidance stops short of meaningfully alleviating burdens placed on the taxpayer and underestimates the scope of unemployment fraud in 2020.
In addition to the unprecedented burden placed on the states to reissue so many corrected Forms 1099-G with less than three months before the tax filing deadline on April 15, the most recent IRS guidance places the onus on the taxpayer to simply “file an accurate tax return, reporting only the income they received” should they be unable to obtain a revised Form 1099-G in time to file. However, many of our constituents will be wary of self-correcting this error for fear of adverse IRS action.
It is with these concerns in mind that we ask the IRS and DOL to take additional steps to protect taxpayers and reduce the burdens placed on the states who administer our unemployment programs.
We ask the IRS to take the following courses of action:
1. To address our concerns regarding “[t]axpayers who are unable to obtain a timely, corrected form from states,” we ask the agency to extend the deadline by which states are required to submit Forms 1099-G for those under review for fraudulent activity. For many taxpayers, receiving the Form 1099-G will be the first notice that they may be victims of fraud, and we are concerned that the filing season timeline will not allow for errors to be corrected in time. By extending the deadline for this subset of Form 1099-G recipients, states would be given more time to investigate alleged incidents of fraud and, ultimately, only submit accurate, corrected Forms 1099-G to the IRS for processing. This will help to mitigate and minimize IRS exposure by preventing subsequent “mismatch” audit flags in cases of unreported 1099-G income.
2. Even with an extended deadline and diligent follow-up on the part of states, there will be cases that fall through the cracks. For example, cases in which a fraudster filed an unemployment claim using a stolen identity but using a different address. In such cases, the IRS will receive a 1099-G form from the state, but the taxpayer will remain unaware. The IRS should implement a “hold harmless” process for those taxpayers whose 1099-G's are flagged as unreported income if those taxpayers believe they are victims of identity theft or fraud, such that no penalties or interest will accrue against them. Therefore, we ask that the IRS issue clear guidance to the taxpayer and to IRS staff stating that for those who file an accurate tax return pursuant to the IRS's most recent guidance, they will be held harmless until a final determination is made by the state unemployment administrator. If the amount initially reported on the 1099-G is determined to be valid, the IRS should then apply the amount to the tax year in which it was determined to be valid without any penalties or interest.
3. Third, we ask that the IRS partner with the DOL and those in the tax preparation community to help educate the public on the issue of identity theft involving unemployment benefits and to work with states to normalize procedures for identifying and verifying fraudulent cases. Millions of Americans who file taxes electronically, often doing so without direct assistance from a tax professional, may not be aware of this known problem, and we believe the IRS is well-situated to work with those companies and individuals in the industry to help raise awareness more broadly.
4. Finally, we ask the IRS work with the DOL to track and report on the amount of fraudulent unemployment benefits that are removed from 1099-G forms due to fraud. States should be required to submit this information and the IRS or DOL should publicly report the amount of unemployment benefits that were ultimately “zeroed out” and not included on 1099-G forms as part of taxpayers' aggregate incomes to track the national amount of fraudulent activity in the unemployment program.
Ultimately, we are seeking additional solutions from the IRS and DOL that will achieve the goals of reducing the burden placed on the states while also protecting taxpayers who are victims of fraud and already navigating a complicated filing season.
We ask IRS and DOL to make us aware of any regulatory or legislative barriers to implementing these solutions and any other recommendations the agencies have for specific measures that are needed to provide this relief. We stand ready to work with you to accomplish this goal.
Thank you for your consideration and for the tireless work IRS and DOL staff have conducted over the course of the COVID-19 public health emergency.
Sincerely,
Brad R. Wenstrup, D.P.M.
Member of Congress
Steve Stivers
Member of Congress
David Schweikert
Member of Congress
Tom Rice
Member of Congress
Kevin Hern
Member of Congress
Steve Chabot
Member of Congress
Anthony Gonzalez
Member of Congress
Darin LaHood
Member of Congress
Warren Davidson
Member of Congress
Ben Cline
Member of Congress
Jackie Walorski
Member of Congress
Stephanie Bice
Member of Congress
Bill Johnson
Member of Congress
Michael Turner
Member of Congress
Robert E. Latta
Member of Congress
Troy Balderson
Member of Congress
Doug LaMalfa
Member of Congress
Ron Estes
Member of Congress
A. Drew Ferguson, IV
Member of Congress
Bob Gibbs
Member of Congress
Adrian Smith
Member of Congress
Rick Crawford
Member of Congress
Scott Perry
Member of Congress
Brian Fitzpatrick
Member of Congress
Brett Guthrie
Member of Congress
Ken Calvert
Member of Congress
Lloyd Smucker
Member of Congress
Russ Fulcher
Member of Congress
Devin Nunes
Member of Congress
David P. Joyce
Member of Congress
Dr. James R. Baird
Member of Congress
Carol D. Miller
Member of Congress
Randy K. Weber
Member of Congress
Neal P. Dunn, M.D.
Member of Congress
Jim Jordan
Member of Congress
Tom Reed
Member of Congress
Doug Lamborn
Member of Congress
Jodey Arrington
Member of Congress
Frank Lucas
Member of Congress
- AuthorsWenstrup, Rep. Brad R.Stivers, SteveSchweikert, Rep. DavidRice, Rep. TomHern, Rep. KevinChabot, Rep. SteveGonzalez, Rep. AnthonyLaHood, Rep. DarinDavidson, Rep. WarrenCline, Rep. BenWalorski, Rep. JackieBice, Rep. Stephanie I.Johnson, Rep. BillTurner, Rep. Michael R.Latta, Rep. Robert E.Balderson, Rep. TroyLaMalfa, Rep. DougEstes, Rep. RonFerguson, Rep. A. Drew, IVGibbs, Rep. BobSmith, Rep. AdrianCrawford, Rep. Eric A. "Rick"Perry, Rep. ScottFitzpatrick, Rep. Brian K.Guthrie, Rep. BrettCalvert, Rep. KenSmucker, Rep. LloydNunes, Devin GeraldJoyce, Rep. David P.Baird, Rep. JamesMiller, Rep. Carol D.Weber, Rep. Randy K., Sr.Dunn, Rep. Neal P.Jordan, Rep. JimReed, TomLamborn, Rep. DougArrington, Rep. Jodey C.Fulcher, Rep. RussLucas, Rep. Frank D.
- Institutional AuthorsU.S. House of Representatives
- Subject Area/Tax Topics
- Jurisdictions
- Tax Analysts Document Number2021-5070
- Tax Analysts Electronic Citation2021 TNTS 26-282021 TNTF 26-23
