A Growing Threat: Unemployment Identity Fraud

Unemployment fraud can affect you even if you’re currently working

Unemployment benefits can serve as a lifeline if you’re out of work, helping to ease some of the stress and financial burden of losing your job. Unfortunately, those benefits can also become a vehicle for fraudsters to victimize you, putting your identity and finances at risk.

The U.S. Federal Trade Commission (FTC) recently issued an identity theft alert: Scammers are using people’s Social Security numbers to file fraudulent unemployment claims.

According to the U.S. Department of Labor (DOL), a common version of this crime is called “claim hijacking,” in which fraudsters use stolen personal information to log into a victim’s unemployment account and steal the person’s benefit payments. The victim stops receiving the payments they’re owed, and later discovers that the bank account or address on their claim has been changed without their consent.

It’s important to note that you don’t need to be out of work to become victimized: Once scammers have your Social Security number and other personal information, they can attempt to file for unemployment benefits in your name—even while you’re still on the job.

This scam can also affect those who are retired or on disability or other social services. If you’re receiving Supplemental Security Income (SSI), unemployment identity fraud can impact payouts and delay crucial day-to-day funding.

Signs that you’ve been victimized

Fake benefit claims could lead to tax identity theft or the government garnishing your wages, so it’s important to take action. Here are the main ways of determining that unemployment fraud has been committed in your name, according to the DOL:

• You receive a notification letter from a state agency regarding an unemployment claim or payment, even though you didn’t recently file for unemployment benefits.
• You get a 1099-G tax form that details unemployment benefits you either weren’t expecting or did not receive.
• If you’re unemployed and expecting to receive benefits, you discover that your payments have been sent elsewhere, even though you didn’t authorize changes to your account.
• If you’re currently working, you get a letter from your employer stating that they’ve received a request for information about an unemployment claim in your name.

What to do if you’ve been defrauded

Fake benefit claims could lead to tax identity theft or the government garnishing your wages, so it’s important to take action. Here are the main ways of determining that unemployment fraud has been committed in your name, according to the DOL:

If you believe you’ve become a victim of unemployment identity fraud, be sure to act quickly—the faster you act, the greater the odds that you’ll be able to limit any damage and keep your personal information safe. Recommended steps include:

Report the fraud to your employer. If you’re currently employed, report it to your company. If you’re out of work, report it to your former employer.

Notify your state employment agency so they can investigate the identity theft. The DOL offers a state-by-state directory of verified websites and phone numbers for reporting unemployment identity fraud. Note that many fraudsters set up unemployment identity fraud schemes outside of the victim's state; in that circumstance you’d need to contact the state employment agency where the fraud occurred. Also be aware that the state won’t send you updates on the case, because you aren’t the one who filed the original false claim. (Due to privacy laws, states cannot disclose information pertaining to unemployment insurance claims that are not yours.)

Request a corrected tax form 1099-G from your state. This way, the IRS will have your correct compensation amount and any appropriate withholding. When filing income taxes, only include the unemployment income you’ve actually received, even if you haven’t yet gotten an updated 1099-G from your state.

Carefully monitor your credit and frequently review your credit reports. Always keep a watchful eye on your credit—you’ll be able to spot suspicious activity more quickly. If you see a new account or line of credit that you don’t recognize, contact the credit bureau to dispute it. You can get free credit reports through AnnualCreditReport.com, a site authorized by federal law. (Continuous credit monitoring and free credit reports are included with IDX Complete Plan membership.)

Freeze your credit. This makes it more difficult for anyone to open accounts using your personal information. To do so, you’ll need to contact all three of the three major credit bureaus (Equifax, Experian, and TransUnion). Alternatively, consider a credit lock: It restricts access to your credit file, it’s faster to set up, and it can be removed instantly. The IDX Complete Plan includes Credit Lock by TransUnion® at no extra charge.

Set up an IRS ID PIN. You’ll receive a unique six-digit number that helps prevent criminals from fraudulently filing a tax return in your name, even if they have your Social Security number.

Report the fraud to the FTC at IdentityTheft.gov. If you decide to go through the identity recovery process on your own, the FTC can help. Alternatively, you can have a dedicated team do the work for you: The IDX Complete Plan includes a 100% identity recovery money-back guarantee and offers access to IDX’s expert care team, who will work with your financial institutions and the credit agencies to ensure your identity is fully restored.

Check to see how much of your identity is exposed. If bad actors have used your personally identifiable information to commit unemployment identity fraud, they’re likely trying to commit other types of fraud as well. Check to see which parts of your personal information have been potentially exposed or compromised. Use tools like Dark Web Monitoring and Password Checker, both available as part of the IDX Complete Plan.