Ask The California Employment Tax And Payroll Tax Attorney – How Tax Professionals Can Assist Clients Who Where Victims Of Ui Compensation Fraud.

By Robert S. Schriebman
2021

Introduction

We have a massive problem in this country and especially here in California. -Unemployment Compensation fraud. The U.S. Department of Labor’s Inspector General estimated approximately $89 billion in unemployment compensation was lost in 2020 due to fraud. The problem is not going away. All signs point to a new round of Covid issues and more unemployment misery.

The IRS and its Security Summit partners are well aware of this fraud epidemic. On August 4, 2021 the IRS released IR-2021-163 to offer advice to tax professionals so they can assist their clients who are fraud victims.

The Problem

Thieves obtain valid employee data and information anyway they can get it. Recently two crooks entered a high-end grocery store in my community posing as IRS agents. Showing their phony I.D.’s they obtained vast amounts of data and information on the store’s employees-and walked out the door. When the owners found out what happened it was too late.

Crooks take stolen data and file false unemployment compensation claims. California issues 1099-G forms to innocent taxpayers who now have issues regarding their wrong tax returns. Some taxpayers received forms from multiple states. Phony refund claims are also filed and the crooks rewarded.

What can tax professionals do to help these people?

How Tax Professionals help?

1. File a Form 14039, Identity Theft Affidavit. This form is used only if an e-filed tax return is rejected because the Social Security number has already been used.
2. Report the fraud to the EDD and the FTB and request a corrected 1099-G.
3. File a tax return that reports only the actual income received.
4. Have your client obtain an IRS Identity Protection PIN. This will protect the client’s SSN.

Remember that a large portion of UI compensation is excluded from income for 2020. ($10,200 for individuals and twice that for joint returns assuming AGI is less than $150,000).

Conclusion

Tax professionals should be aware of two IRS publications that may prove helpful.

1. IRS Publication 4557, Safeguarding Taxpayer Data, and Small Business Information Security.
2. Publication 5293, Data Security Resource Guide for Tax Professionals.

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Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 50 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments.  Mr. Schriebman is in private practice.  He is not affiliated in any way with the EDD and he is not employed by the EDD or any other agency of the State of California.

Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.

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