Wenstrup, Stivers seek tax fraud protections for Americans receiving unemployment benefits

As the nation works to recover from the COVID-19 pandemic, U.S. Reps. Brad Wenstrup (R-OH) and Steve Stivers (R-OH) said they are increasingly concerned about the coming crisis for millions of American taxpayers who have had unemployment benefits fraudulently claimed in their names.

With the new tax filing season set to begin on Feb. 12, the lawmakers requested that the Internal Revenue Service (IRS) and the U.S. Department of Labor (DOL) provide clarity, certainty and relief to victims of unemployment insurance fraud, according to a Feb. 6 letter they sent to U.S. Treasury Secretary Janet Yellen and Acting DOL Secretary Al Stewart.

“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,” wrote the lawmakers.

Tens of thousands of unemployment claims were filed fraudulently in Ohio, according to Reps. Wenstrup and Stivers.

“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,” Rep. Stivers said. “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.” 

Rep. Wenstrup agreed, pointing out that Congress quickly acted 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,” he said. “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.”

In their letter, the congressmen made several requests, including that the deadline by which states are required to submit Forms 1099-G for those under review for fraudulent activity be extended; that a “hold harmless” process be implemented for taxpayers whose 1099-Gs are flagged as unreported income if those taxpayers believe they are victims of identity theft or fraud; and to partner with 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.

“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,” wrote the lawmakers, “we believe the guidance stops short of meaningfully alleviating burdens placed on the taxpayer and underestimates the scope of unemployment fraud in 2020.”