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Taxed for unemployment you didn't receive? What the IRS says you should do

Tax Season Begins
Posted at 3:00 AM, Feb 15, 2021
and last updated 2021-02-15 09:41:53-05

The IRS has started accepting income taxes and some Arizonans are concerned they'll be paying more than they should.

The Rebound Arizona reported about the possibility of income tax forms for unemployment money going to people who never received that money.

So, what is the IRS or the state doing about it? According to one Valley woman, not much.

Chantel contacted the Let Joe Know team who said she received two unemployment debit cards but never applied for them.

They came from Arizona and from the state of Pennsylvania.

Chantel says she contacted both states, put fraud alerts on her accounts and thought everything was okay.

"Then I opened the mail yesterday and it's a 1099-G from the state of Pennsylvania that I received almost 10,000 dollars in benefits," she says.

But again, Chantel never received that money and despite her calls to clarify, she's worried.

"The stress and anxiety of it. It's scary," she says.

For months, the Let Joe Know team has reported about how people in Arizona and across the country have been caught up in massive unemployment fraud. They say they've received unemployment money though they never applied for it.

Because unemployment compensation is taxable, some of those people are getting forms indicating they received the money and need to pay taxes on it.

The IRS says if this happens to you, contact the state and get a revised 1099-G form showing you did not get the unemployment benefits.

That revised form would come from the state's Department of Economic Security (DES) who says if you were a victim, report it by clicking here.

They will review your case and you will not be held responsible if it's determined to be a fraud.

But like thousands of other Arizonans, Chantel is concerned DES won't be able to get out those revised forms in a timely manner.

"Just getting through was ridiculous when you did get through, they didn't know what to do," she says.

Despite a request from lawmakers including Congressman David Schweikert asking states to get more time to revise the form, the IRS is not allowing filing delays for people caught up in this.

The IRS says in part "taxpayers who are unable to obtain a timely, corrected form from states should still file an accurate tax return, reporting only the income they received."

"So, they're saying file your taxes as you would, the IRS is aware. That's just scary too," Chantel says.

While the Let Joe Know team is still working with the state of Pennsylvania's unemployment department for Chantel, she's concerned she could receive another tax form for money she didn't get in Arizona.

However, that hasn't happened at this time.