HANNOVER (CBS) – Pandemic unemployment fraud has been a huge problem across the country, but a Hanoverian couple had no idea they were in trouble until they received a tax form for benefits he never received or applied for.
Linda Kearns says her husband received a Form 1099-G in the mail claiming he owed taxes on $22,000 in unemployment benefits. “He never received a penny of unemployment in his 40-year career,” she said.
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Linda and her husband immediately appealed. The Department of Unemployed Assistance returned a letter stating that an investigation had been completed and that the form was correct. “We have to pay taxes on this money to the IRS to the tune of $8,000,” Linda said as she read the letter saying they could dispute this tax payment with the IRS. “Good luck with that,” she said.
Tax experts agree with this. In order to dispute that payment, the Kearns would have to pay the money, then file an amended Form 1040-X and try to recover the money from the IRS. Hingham tax accountant Tim MacLellan says the IRS is backed up in processing 1040-X forms and could miss that money for a long time. “At least a year,” he said.
We encouraged Linda to contact her state senator who contacted her immediately. “If I received a letter like this, I would probably be in shock or probably have a heart attack,” Senator Michael Brady said half-jokingly.
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Brady told us he contacted the Department of Unemployed Assistance and they agreed to send the couple a new form which would correct the problem.
What is most troubling for Linda is the fact that her husband’s company sent documents to the state months ago showing that her husband was still employed and that the claim was fraudulent. “I don’t think they even did an investigation. They’ve basically washed their hands of it and now want to put it on the IRS, which means a lot of work on our end to get it rectified,” she said.
The state Department of Unemployed Assistance provided the following statement on the process for investigating fraudulent claims:
Taxpayers are not required to pay taxes on money they never received. However, once the benefits are paid, the DUA must investigate the matter to confirm the true beneficiary. The DUA Program Integrity Team will process reported fraud to ensure that if any payments have been made, they are not recognized as income and are not reported to the IRS on Form 1099-G at the end of the calendar year for tax purposes. If a voter receives a Form 1099-G related to this fraudulent claim, the DUA will, upon notification, send a corrected Form 1099-G. Further, the fraudulent claim will not impact a voter’s ability to collect unemployment in the future and no charges will be imposed on the voter’s employer (if any).
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If the DUA reviews a request and determines that the 1099-G was properly issued, and the grantor disagrees, then the matter should be raised by the grantor directly with the IRS.