Unemployment fraud in the U.S. has reached dramatic levels during the pandemic — the Labor Department inspector general’s office estimates that more than $63 billion has been paid out improperly through fraud or errors since March 2020.
Criminals are seizing on the opportunity created by the pandemic. Using data stolen from prior data breaches, the criminal makes a claim using someone else’s identity to access an increased pool of benefits. About $550 billion was spent in support of those out of work in 2020, compared with an average of $32 billion in the previous five years. States, often overwhelmed with claims, navigating new rules and using outdated systems, have struggled to keep up.
The problem cuts deep for victims, who can face delays getting their legitimate benefits, are at risk for further fraud and are left to resolve much of the problem themselves.
Experts say everyone should be on alert. Here's what you should know about how to spot unemployment fraud, protect yourself and what to do if you are a victim.
Unfortunately, most people do not know they are a victim until the damage is done.
People typically find out about the problem when they receive benefits-related paperwork in the mail, a call from their employer or when they try to file a legitimate claim for benefits and are denied. In some cases, a criminal may initiate the false claim but the money itself is sent to the victim's account or home. The fraudsters may also build on a legitimate claim by requesting further benefits and nabbing those.
Unfortunately, the fraud may have been perpetrated months ago but some people may just be finding out now because of tax season. States are required to mail out a 1099-G form, which reports income from unemployment benefits. People may receive these for benefits they never claimed, sometimes from multiple states. A taxpayer may also discover the issue after they file their federal taxes, only to be alerted later by the IRS that they did not report all their income, due to the bogus claim.