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Fraudulent unemployment claims are increasing

News | Jul 7, 2021

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Updated 07/21/2021 - Added additional information about the Pennsylvania Department of Labor & Industry partnering with ID.Me to help reduce the amount of fraudulent claims.

Over the past year, the number of unemployment claims has skyrocketed. This dramatic increase has led to more fraudulent filings.

According to the Office of the Inspector General (OIG) – the federal agency that provides oversight of the U.S. Department of Labor – an estimated $87.3 billion of unemployment benefits could be paid improperly. The OIG attributes a majority of these improperly paid benefits to fraud.

There are several reasons for the increase in fraudulent activity. The Coronavirus Aid, Relief, and Economic Security (CARES) Act expanded many of these benefits. While this helped many in need, it also made it more lucrative for criminals. In addition, the massive increase of filings overwhelmed many state agencies. This, in turn, delayed the investigation of possibly fraudulent claims.

What is happening

Criminals obtain a stolen identity from phishing emails, prior data breaches, or a variety of other techniques. It is important to recognize that criminals could use identities that may have been exposed years ago.

With this stolen personal information, a criminal makes a claim using someone else’s identity to access the expanded benefits. Since many state’s unemployment offices are overwhelmed with a high number of claims, criminals are hopeful they can go undetected.

How to tell if you're a victim of unemployment fraud

Victims of unemployment identity theft usually find out when they:

Attempt to file a legitimate claim for unemployment only to be denied.
Receive an unexpected payment and/or notification from a state agency despite never filing for unemployment benefits.
Receive a Form 1099-G that either lists a higher amount of unemployment benefits received or an amount never received. Or, receive a Form 1099-G from a state that they don't live in.
Are notified by their employer about an unemployment claim even though they are still employed by that employer.

What you should do

If you believe you are a victim of unemployment identify theft, you should report the suspected fraud to your employer’s HR department, local law enforcement, and the three credit reporting bureaus. Keep an eye on all of your bank and credit accounts for any suspicious transactions.

In addition, you should report the crime to the state’s unemployment agency that the fraudulent claim was made to. If you believe your identity was used to submit claims in multiple states, you should report the fraud to each state. The U.S. Department of Labor has contact information for each state’s fraud department.

When it comes to the IRS, do not delay filing your taxes. Proceed with filing your taxes on time while your unemployment fraud claim is investigated. If you received a Form 1099-G, do not report the incorrect amount on your tax return. Only report income that you actually received.

Finally, the Federal Trade Commission has a dedicated website for victims of identity theft. This site details the steps you should take to help report and recover from identity theft.

Pennsylvania Department of Labor & Industry Responds

In response to the increase of fraudulent claims, the Pennsylvania Department of Labor & Industry has partnered with ID.Me to provide identity verification services for all new unemployment compensation claims. ID.Me is a federally-certified technology partner that provides secure identity verification services.

The ID.Me verification process was implemented into the unemployment claim application process. When an individual files an unemployment claim, that person is now required to go through additional steps to verify their identity. These additional measures have been put in place to help reduce the amount of claims being filed using stolen personal information.