Will Identity Theft Victims Have to Pay Tax on Unemployment Benefits They Didn't Receive?
Scammers were busy last year filing bogus unemployment benefit claims using stolen personal information. Here's what the IRS has to say about taxes for ID theft victims.


When most people think of identity theft, images of phony bank accounts, fraudulent tax returns, and unauthorized credit card purchases spring to mind. But there are many other ways scammers can use your personal information to steal money or property – like filing false unemployment benefit claims. There was a rash of this kind of identity theft activity in 2020, which was driven by the rush to get unemployment benefits out quickly during the pandemic and the lure of an extra $600 per week in benefits for part of the year.
But some identity theft victims are now getting a Form 1099-G in the mail reporting unemployment benefits they never received. Unemployment benefits are subject to federal income tax just like wages, and most states tax them too. So, does that mean identity theft victims will have to pay taxes on the unemployment benefits that were swindled using their personal information?
The IRS says "no." The tax agency is telling ID theft victims who receive an incorrect Form 1099-G for unemployment benefits they didn't receive to contact the issuing state agency and request a revised Form 1099-G showing that they didn't get these benefits. The IRS is also instructing states to issue corrected forms to the identity theft victims as soon as possible after the error is discovered.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Identity theft victims who are unable to obtain a corrected 1099-G form before filing their 2020 tax return should still file a return, but only report income they actually received (2020 returns are due April 15, 2021). The IRS will receive a copy of the corrected 1099-G form when it's issued.
Identity Protection PIN Numbers
If you're worried about your personal information being stolen and used to file a fraudulent tax return, you can request an Identity Protection PIN (IP PIN) from the IRS. An IP PIN is a six-digit number that prevents someone else from filing a tax return using your Social Security number. The IP PIN is known only by you and the IRS, and this step helps the IRS verify your identity when you file an electronic or paper tax return.
In the past, only confirmed identity theft victims were able to get an IP PIN. However, starting in 2021, anyone can request an IP PIN and an extra layer of protection from tax-related identity theft. You'll have to pass a rigorous identity verification process, though. Spouses and dependents are also eligible for an IP PIN if they can pass the identity proofing process.
How do you get an IP PIN? If you're a confirmed identity theft victim, the IRS will mail you an IP PIN if your case is resolved prior to the start of the next filing season. Otherwise, you should use the IRS's online Get an IP PIN tool. If you don't already have an account with the IRS, you must first register to validate your identity.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Rocky Mengle was a Senior Tax Editor for Kiplinger from October 2018 to January 2023 with more than 20 years of experience covering federal and state tax developments. Before coming to Kiplinger, Rocky worked for Wolters Kluwer Tax & Accounting, and Kleinrock Publishing, where he provided breaking news and guidance for CPAs, tax attorneys, and other tax professionals. He has also been quoted as an expert by USA Today, Forbes, U.S. News & World Report, Reuters, Accounting Today, and other media outlets. Rocky holds a law degree from the University of Connecticut and a B.A. in History from Salisbury University.
-
Cord Cutting Could Help You Save Over $10,000 in 10 Years
How cutting the cord can save you money and how those savings can grow over time.
-
The '8-Year Rule of Social Security' — A Retirement Rule
The '8-Year Rule of Social Security' holds that it's best to be like Ike — Eisenhower, that is. The five-star General knew a thing or two about good timing.
-
Ask the Editor, June 27: Tax Questions on Disaster Losses, IRAs
Ask the Editor In this week's Ask the Editor Q&A, we answer tax questions from readers on paper checks, hurricane losses, IRAs and timeshares.
-
2025 SALT Cap Could Hurt Top 'Hidden Home Cost'
Tax Deductions The latest GOP tax bill might make hidden homeowner costs worse for you. Here’s how.
-
Retire in the Bahamas With These Three Tax Benefits
Retirement Taxes Retirement in the Bahamas may be worth considering for high-net-worth individuals who hate paying taxes on income and capital gains.
-
Ask the Editor, June 20: Questions on Tax Deductions and IRAs
Ask the Editor In our latest Ask the Editor round-up, Joy Taylor, The Kiplinger Tax Letter Editor, answers four questions on deductions, tax proposals and IRAs.
-
2025 Virginia Tax Rebate Checks Coming Soon? What to Know Now
Tax Rebates Given a historic 2025 gubernatorial race, tax policy will remain a key issue for Virginians in the months ahead.
-
Don't Miss These Four Tax Breaks for Americans Living Abroad in 2025
International Tax U.S. expats can reduce their tax burden by taking advantage of a handful of tax credits and deductions.
-
Summer Backyard Ideas With Added Tax Benefits for 2025
Tax Tips Find out how these summer 2025 home projects can help you save on taxes next year.
-
Ask the Editor, June 13: Questions on Home Sales and Taxes
In our latest Ask the Editor round-up, Joy Taylor, The Kiplinger Tax Letter Editor, answers questions on home sales and calculating tax basis in a home.