By Dominika Ferek, Senior, Tax and Joe Roznai, CPA, CGMA, Partner
Massive Illinois Unemployment Fraud Reported
You may have already heard the news that the Illinois Department of Employment Security (IDES) is reporting an increase in fraudulent unemployment claims in recent months. In addition to Illinois, many other states are receiving similar fraudulent claims. At this time of COVID-19 related economic struggle for so many, IDES continues to be flooded with a record number of legitimate unemployment claims. On top of difficulties keeping up with real claims, the IDES is dealing with scammers taking personal and private information and using it to file fraudulent claims for unemployment benefits.
Billions of personal records are breached every year, exposing email addresses, passwords, names, credit card numbers, phone numbers, and Social Security Numbers (SSN) to bad actors. Many of us have previously been exposed to cyber attacks and identity theft, such as the Equifax breach and other large-scale data breaches. This is the latest exposure to fraud and theft.
According to the latest guidance from the Illinois Department of Revenue, you may be a victim if one of these situations apply:
- You receive a debit card or an unemployment insurance benefits letter, but you did not file a claim for benefits
- You are notified by your employer that a claim for benefits has been filed but you are still working there
- You attempt to file a claim online and one already exits
- You receive IRS correspondence regarding unreported Unemployment Insurance benefits
- You receive notice of a state or federal tax offset
If you believe that you are a victim of Illinois Unemployment Fraud, it is imperative to take immediate action. IDES recommend following these steps:
- Report the fraudulent activity by completing the Identity Theft form online at https://www2.illinois.gov/ides/Pages/Report-Identity-Theft.aspx or by calling IDES Benefits Payment Control Division at 800-814-0513
- File a police report with your local police department
- Call the Federal Trade Commission at 877-FTC-HELP 877-382-4357 or report identity theft online at https://identitytheft.gov/
- Contact one of the three major credit bureaus to place a “fraud alert” on your credit records (with a police report, you can set up the fraud alert on your accounts for seven years):
i. Equifax, www.Equifax.com/personal/credit-report-services, 800-525-6285
ii. Experian, www.Experian.com/help, 888-397-3742
iii. TransUnion, www.TransUnion.com/credit-help, 800-680-7289
- Notify the Social Security Office that your SSN was stolen
- Since Illinois unemployment benefit letters include your SSN, you should also apply for an IRS Identity Protection Pin (IP PIN) to prevent anybody from using your personal data to file false income tax returns to cash in on fraudulent refunds.
- Contact our Tax Department if you have been a victim of unemployment fraud, either personally or as an employer. Our professional team can help.
IRS Identity Protection PIN (IP PIN) Opt-in Program
The IRS has sought to stop bogus tax refund applications by expanding the IP PIN Opt-in Program to all taxpayers who can verify their identities. This program is voluntary, but IRS urges taxpayers to opt into the IP PIN program to prevent fraudulent income tax filings.
There have been many false tax refund schemes where the fraudsters use personal identity information and fictitious, misdirected or stolen W-2 forms to electronically file an unauthorized tax return to claim a refund in the name of a taxpayer. Many taxpayers first learn of the fraud when their e-filed tax returns are rejected.
IRS has created the online “Get an IP PIN” tool, which launched on January 12, 2021, and it is the fastest way to get an IP PIN. The IP PIN is a six-digit number assigned to eligible taxpayers and is only known to the taxpayer and the IRS. Taxpayers interested in obtaining the IP PIN must first open an online account on www.IRS.gov to validate identity and pass a rigorous identity verification process. Taxpayers who cannot establish identity online through the Secure Access authentication can follow one of the following alternative procedures to obtain an IP PIN, though they will not receive one immediately:
- Taxpayers with income of $72,000 or less with access to a telephone should complete Form 15227, Application for an Identity Protection Personal Identification Number. The completed form should be mailed or faxed to the IRS, and then the IRS agent will call the taxpayer to verify their identity with a series of questions.
- If the taxpayer cannot verify their identity remotely or is ineligible to file a Form 15227, the taxpayer can make an appointment for an in-person meeting at a Taxpayer Assistance Center. The IRS requires the taxpayer to bring one picture identification document and another identification document to prove their identity. An IP PIN will be mailed to the taxpayer within three weeks of the meeting.
What you need to know about the IP PIN before applying:
- The “Get an IP PIN” tool is available online at https://www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin. This is the preferred method of obtaining an IP PIN and the only way to immediately obtain the PIN.
- Taxpayers who voluntarily opt into the IP PIN program do not need to file a Form 14039, Identity Theft Affidavit.
- The IP PIN is valid for one year. The taxpayer must obtain a newly generated IP PIN every January.
- Provide your IP PIN securely to your tax preparer—do not email it. It must be entered correctly on electronic and paper tax returns to avoid rejections and delays.
- All taxpayers with either a SSN or Individual Tax Identification Number (ITIN) who can verify their identity are eligible for the program.
- Any primary or secondary taxpayer or dependent can get an IP PIN if they can prove their identity.
There is no change in the IP PIN program for confirmed victims of tax-related identity theft. Those taxpayers should still file Form 14039 if their e-filed tax return is rejected because of a duplicate SSN filing. The IRS will investigate the case. Once the fraudulent tax return is removed from their account, confirmed victims will automatically receive an IP PIN via postal mail at the start of the next calendar year. IP PINs will be mailed annually to confirmed victims only and participants enrolled before 2019. Because of security risks, confirmed identity theft victims cannot opt-out of the IP PIN Program. Confirmed victims also can use the “Get an IP PIN” tool to retrieve lost IP PINs assigned to them.
We highly recommend that you obtain an IP PIN for yourself and your family as soon as possible. Fraudulent income tax returns are most frequently filed early in the tax season, so the sooner you get your IP PIN the less likely your data will be used for a fraudulent tax return. If you have any questions or would like help in getting your IP PIN, please contact our Tax Department at 847-982-0333.
Dominika Ferek, Senior, Tax, has over four years of experience at MichaelSilver. Her tax expertise includes compliance and planning services for individuals, corporations, partnerships, and trusts. Dominika is a graduate from the Driehaus College of Business at DePaul University.
Joe Roznai, CPA, CGMA, Partner, is the leader of our state and local tax practice, as well as our international tax team. He has more than 30 years of federal, state and local tax planning, consulting and compliance experience, working with entrepreneurial businesses across a wide range of industries, including manufacturers, distributors, real estate, leasing companies, retailers, service providers, and auto dealers. He has expertise in corporate reorganizations, multi‐state income, franchise, personal property and sales and use taxes, international reporting, and related appeals.