“As you know, unemployment benefits are reported on a taxpayer’s return and taxed as income,” wrote the lawmakers in their letter. “Recipients of unemployment compensation therefore receive an IRS Form 1099-G (Certain Government Payments) and must report the benefits as income on their federal income tax return. Recently, there were reports that Americans are receiving Forms 1099-G for unemployment compensation that they never applied for or received. These individuals appear to be victims of an identity theft scheme where someone else received unemployment benefits using the victims’ personal information.”

The Committee leaders continued with: “Understandably, victims are alarmed to discover that they were victims of fraud and are confused about the impact of this on their federal income tax returns. As so many Americans struggle through the worst economy in a generation, the IRS should act quickly to alleviate their concerns. These victims should not be expected to report and pay tax on amounts shown on a Form 1099-G issued as a result of fraud. Further, we cannot allow their income tax refunds—which often are the single largest payment an individual receives each year—to be held up indefinitely while the IRS investigates an identity theft claim.”

The lawmakers concluded their letter by requesting that the IRS issue additional, detailed guidance for individuals who may have been victims of identity theft, including a description of how unreported Form 1099-G income will affect the processing of a taxpayer’s 2020 income tax return. Additionally, the lawmakers asked that the IRS conduct an outreach campaign to ensure that its guidance reaches affected individuals as soon as possible, and requested answers from the IRS to a list of questions by March 5, 2021.

The full letter is available HERE.