Stimulus Scams Have Been Rampant. This Document Could Tell You if You're a Victim

One form could clue you in that someone's stolen your identity.

When the COVID-19 outbreak first exploded, millions of Americans rushed to file unemployment claims. Many of those claims were legitimate, as layoffs were rampant and those who lost work through no fault of their own needed a lifeline.

But there's been a notable uptick in financial fraud since the start of the pandemic, and much of it has centered on jobless benefits. Despite states having different verification systems in place to detect unemployment scams, criminals have gotten away with filing false claims and directing benefits into their bank accounts.

Even if you're convinced you've made it through the pandemic so far without being a victim of financial fraud, you might soon get an unpleasant wakeup call in the mail. You'll need to pay attention to the tax forms that come your way.

Your first clue that something's amiss

Workers who received unemployment benefits last year should be getting a tax form called 1099-G in the mall. State agencies issue these forms so unemployment recipients know how much unemployment income to list on their taxes.

As a refresher, unemployment benefits are considered taxable income. Lawmakers made an exception for jobless benefits received in 2020, but under normal circumstances, if you collect unemployment benefits, you either have to withhold a portion of that income for tax purposes upfront or settle your bill when you file your tax return.

If you get a 1099-G in the mail for unemployment benefits you never filed for, it's a sure sign someone has managed to get a hold of your Social Security number and steal your identity. That's an issue you'll want to address at once.

For one thing, you'll want to check your bank account and make sure money isn't missing. You'll also want to check your credit cards for fraudulent charges. Then, you'll want to pull your credit report from each of the three bureaus -- Experian, Equifax, and TransUnion -- to see if there are open loans or accounts in your name that you don't recognize.

It may be the case that if someone filed a bogus unemployment claim in your name, that's the only thing they did. But you'll then need to be vigilant and monitor your various accounts and credit reports to stay on top of things. You might also consider putting a freeze on your credit.

Will you owe taxes on unemployment benefits you never received?

If a criminal collected unemployment in your name, fear not -- you won't face a tax liability if you never received that money. But you should report that fraudulent claim to the state unemployment agency that issued your 1099-G.

Meanwhile, you should make a point to file your 2021 tax return as early as possible. Though taxes aren't due until April 18 this year, it's possible someone who's used your name to steal unemployment benefits will also try filing a tax return in your name in an effort to steal your refund. But if you get your return in first, the IRS will bounce the second return it receives with your Social Security number back as a duplicate.