Kokua Line: UI, PUA fraud creates tax hassle for Hawaii residents whose identities are stolen

Question: Back in November our company was notified by the state Department of Labor and Industrial Relations of a pending unemployment claim under my name. Our company notified the DLIR that it was a fraudulent claim and to deny payment. I did not receive any unemployment funds. But this month I received a 1099-G from the DLIR stating that I received $2,592 last year. Who can I contact to correct the 1099-G? I’ve tried calling the department’s Special Activities Unit, but no one answers.

Answer: That unit does handle fraud reports, but readers say that its direct line is often busy or its voicemail full; imposter fraud for unemployment benefits has been rampant during the pandemic, in Hawaii as across the country. Rather than trying to reach the unit directly, people in your situation should call the DLIR’s Call Center and select Option 4, to report fraud or identity theft, Bill Kunstman, a DLIR spokesman, said Monday.

“That routes to staff working on the issue, whereby we report back to the IRS that the taxpayer did not receive UI benefits,” he said.

The toll-free numbers to the DLIR Call Center are 833-901-2272 or 833-901-2275. The local numbers 762-5751 or 762-5752 also connect to the Call Center (depending on their phone service, some callers have trouble reaching the toll-free numbers).

You are the first to report receiving an errant 1099-G to Kokua Line, but we wouldn’t be surprised if there are others, as both the Pandemic Unemployment Assistance program and the Unemployment Insurance program have been plagued by thieves fraudulently claiming benefits in other people’s names. With UI, employers are notified when someone claiming to be furloughed or laid off by them files for benefits; as you’ve learned, imposters sometimes get away with it for a little while. The PUA thieves were harder to track, as this program serves people who are self-employed and therefore have no authorizing employer. Untold billions have been lost to PUA fraud across the country, according to national reports.

States issue Forms 1099-G to the taxpayer and to the Internal Revenue Service to report what taxable income, including unemployment benefits, were issued by state agencies.

The IRS said in a news release Thursday that it had advised states not to issue a Form 1099-G to any individual a state had identified as a victim of identity theft. But the release anticipated that errant 1099-Gs would go out because it also included guidance for people in your situation:

“Taxpayers who receive an incorrect Form 1099-G for unemployment benefits they did not receive should contact the issuing state agency to request a revised Form 1099-G showing they did not receive these benefits. 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 1099-G showing zero unemployment benefits in cases of identity theft will help taxpayers avoid being hit with an unexpected federal tax bill for unreported income.”

In Hawaii the issuing agency would be the DLIR.

The IRS says that “taxpayers do not need to file a Form 14039, Identity Theft Affidavit, with the IRS regarding an incorrect Form 1099-G. The identity theft affidavit should be filed only if the taxpayer’s e-filed return is rejected because a return using the same Social Security number already has been filed.”

Taxpayers concerned that their personal information has been stolen and who want to protect their identity when filing their federal tax return may request an Identity Protection PIN from the IRS. For more information, see 808ne.ws/ippin or go to irs.gov and search for “Identity Protection PIN.”

The DLIR said Form 1099-G for the calendar year 2020 was scheduled to be mailed out last week to everyone who received unemployment insurance or pandemic unemployment assistance benefits last year.

Write to Kokua Line at Honolulu Star-Advertiser, 7 Waterfront Plaza, Suite 210, 500 Ala Moana Blvd., Honolulu 96813; call 529-4773; fax 529-4750; or email kokualine@staradvertiser.com.