Mrs Cad got a 1099G. Didn’t think to much about it and didn’t look at it yet but Colorado is warning residents that if you got a 1099G but did not collect unemployment last year, you may be a victim of identity theft. Needless to say I’m opening it up as soon as I get home.
Here’s the FQ. Suppose I owe taxes on income I did not earn. How do I handle it on my tax forms? I certainly do not want to pay taxes on $10,000 earned by an identity thief and deal with it with the IRS to get it back. But then again, what happens if I file my taxes without listing that 1099 that is presumably in the IRS files? Even if I file a police report, I would think that the IRS’s attitude would be “That’s your problem not ours. Pay us by April 15th or else.”
Here is the IRS’s guidance on the topic. (Apparently it’s common enough that rhey had to publish an article for it.)
The gist of it (if I’m understanding what I read) is that you should report the fraud to the agency which made the payments to the identity thief so that they can issue a corrected 1099-G (presumably with zero income reported).
Don’t forget that the IRS gets their own reports of things like this, so as far as they’re concerned this payment is legitimate and reported, and they’ll probably notice it if you don’t report it yourself (corrected or otherwise).
I’m don’t think this is a good idea. As @gnoitall explained, the IRS has the 1099-G as well, with Unemployment Compensation listed in Box 1. There’s no box for ‘Taxable Amount’ like you will find on 1099-R forms.
Best thing to do is get an amended form. That happened to my BIL the year after the pandemic; it took him about a month to get the corrected form. Obviously, YMMV.
We dont know it is for Unemployment. But again, you Can simply add sch1 and put 0 in the taxable line and explain it. Getting an amended 1099G might not be that easy. The IRS isnt made up of idiots- yes they also have a copy. The worth thing that would happen in an inquiry letter saying you should have reported it, with instructions how to appeal.
But start with that, try to get i amended- if indeed this is a fraudulent UC form- which we dont know yet.
Also, what about 1099s in general? Aaron Fraudster uses Bill Victim’s information on the W4 form when consulting for Fly-By-Night Airlines. Aaron gets the money and Bill gets the tax bill.
Schedule 1, line 24z for the same amount, put text with something like “1099G received in error”
Note that if you get a 1099K in error, new in 2024 is the very first line (not numbered) where you put that in directly, like if you used Paypal or Venmo for personal exchanges.
I don’t want to solely focus on 1099G. Look at the example above I gave of someone using identity theft on a W4 for consulting work. They get the check while you pay the taxes.
Yes. A hypothetical.
It was her state income tax refund from last year, but the question remains what to do if you owe taxes based on someone else using your identity. From any source.
I get that but the IRS is sitting with a 1099 that otherwise says I do owe taxes.
That’s why I wrote the whole second paragraph
But either way: to clarify this question is a hypothetical based on ANY 1099G/R/B etc. where through identity theft a person leave you with their tax bill.
Yes, and the best way is to ask the 1099 etc be fixed. If you cant get that done by filing time, you can do as i suggested. The worst that will happen is that you get a letter from the IRS saying you forgot that amount, whereupon you simply reply and explain. This isnt something that hardly ever happens, the IRS is used to this and has procedures.
Even if you have to file “known wrong” documents to file on time, you need to do the process correctly after the fact (report the ID theft, get corrected income statements) and then amend as soon as possible afterwards.
Also, filing extensions are easy and may buy the time to file correctly the first time.)
I would never file a tax return reporting someone else’s fraud money as my own. I would report it, then take it off as a zero taxable, or just attach a letter explaining why I didnt report it.
Yes, you may have to do that when the IRS questions you. The IRS understands that.
I dont get why you would claim fraud income as your own. If it is fraud income, dont report it as taxable to you. Let the IRS send you an inquiry, and then explain. Meanwhile, yes, but all means you should be trying to get the issuer to correct it. That might take a while. But yes, try that first. Report it, try to get that fixed. File an extension if you would not owe (an extension does nto extend the time to PAY only to file. Do whatever you can to get it fixed.
But if you can’t get them to correct it, and the IRS examiner says you have to, then you can Appeal that decision. Appeals are easy and they are pretty reasonable. If necessary Tax Court is cheap and easy.
I mean if you really want to you can file that as your income, pay, and then file a 1040X. That is not how i would do it. But it is your $$.
Of course, always the best thing to do is consult your own Txa professional- EA or CPA- and ask them how to do it. They know your history and the best way for you to handle this issue.