Tax season raises unemployment fraud worries

EDD: Most fraudulent claims filed in program to help self-employed

SACRAMENTO — In the 11 months since the COVID-19 pandemic began, the state’s Employment Development Department processed 19.8 million unemployment claims, distributing $114 billion in assistance to California residents.

David Stammerjohn, a spokesman for Sen. Susan Eggman, D-Stockton, said the office has helped thousands — if not hundreds of thousands — of residents in District 5 obtain unemployment benefits.

Now, he said Eggman’s office is fielding calls all day, every day regarding possible fraudulent 1099G forms being sent to constituents.

Last month, the EDD reported that 9.7% of the nearly 20 million unemployment claims filed during the pandemic have been determined to be fraudulent.

The EDD has estimated that 95% of the fraud claims identified were filed under the Pandemic Unemployment Assistance program, implemented under the Coronavirus Aid Relief and Economic Stimulus Act.

Those eligible for PUA claims were residents who do not typically qualify for regular state unemployment insurance, including independent contractors, self-employed individuals or business owners.

The remaining 5% of fraudulent payments were made to residents who filed claims under the EDD’s existing unemployment insurance program. In all, the total amount of fraudulent payments made topped $11 billion, the agency said.

“There is a significant amount of fraud being reported, and it’s being investigated by a number of agencies,” Stammerjohn said. “(Congressman) Josh Harder has made an issue of it, because real people have had their names

and information used through these fraudulent distributions, and these victims are now receiving 1099 forms for payments they never received.”

In a media release issued this week, Harder, who represents Modesto, has requested federal support to go after Russian, Chinese and Nigerian crime rings who are allegedly responsible for the fraud.

“I will not stand by and allow thugs overseas to rob taxpayers of their hardearned dollars and prevent families from receiving the benefits they deserve,” Harder said. “The state itself has admitted that EDD has no centralized unit for tracking fraud, so I’m asking the DOJ to step in to protect our money from thieves and fraudsters. With billions on the line, it’s time to step up.”

Stammerjohn said the fraud issue has made its way to various oversight committees at the state Capitol, and both the Senate and Assembly have put EDD on notice.

Eggman said Thursday that the EDD recently stated in legislative hearings that it is not aware of a single case of fraud happening, and that to date, her office has not received reports of fraud affecting her constituents. However, she urged anyone who believes they are victims of fraud to contact her office.

“The very idea that folks who have had their identities stolen could end up getting a tax bill from the state is deeply concerning and entirely unacceptable,” she said. “The Legislature through its oversight function has made clear to the EDD that they need to do everything possible to ensure that only people who lawfully applied for and received aid through the Pandemic Unemployment Assistance program should be receiving 1099 forms from the state.”

The EDD began mailing out 1099G forms early last month, even as reports of fraudulent claims were discovered last summer.

Everyone receiving state unemployment benefits receives a 1099G, but earnings are reported on federal tax forms, not state tax forms.

Stammerjohn said Eggman’s office has not heard of residents who filed under the existing unemployment insurance program receiving fraudulent 1099Gs.

The EDD has set up a hotline at 866-401-2849 if you think you have been a victim of unemployment fraud. You can also fill out an online form at askedd.edd.ca.gov/Fraud.aspx.