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Unemployment Fraud Can Cost You — Here‘s How to Stop It

Unemployment fraud has surged during the COVID-19 crisis, with criminals exploiting overwhelmed systems to steal taxpayer dollars through fraudulent claims using stolen identities. If you receive notification that someone filed for benefits in your name, it is critical to take swift action to report the fraud and protect your finances and identity. This comprehensive guide will equip you with in-depth knowledge on how to recognize, report and reduce your risk of unemployment insurance fraud.

How Does Unemployment Fraud Occur?

Fraudsters use a variety of clever tactics to falsely collect unemployment insurance benefits:

  • Identity Theft – Criminals obtain personal information like your name, date of birth and Social Security number and use it to file for benefits in your name. This is by far the most common scheme.
  • Account Takeover – Fraudsters hack into existing accounts on state unemployment sites and add new payment methods to reroute payouts.
  • Overwhelmed Systems – Floods of new claims during COVID-19 made it easier for criminals to sneak through fake applications, with less verification.
  • Unreported Income – Individuals continue collecting unemployment after returning to work and simply fail to report their new income status.
  • Employer Fraud – Dishonest employers misclassify why an employee lost their job to prevent them from rightfully obtaining earned benefits.

Unemployment fraud rates have skyrocketed during the pandemic. The Labor Department estimates a minimum of $87 billion in fraudulent benefits were paid out over the past two years, with the true total likely far higher.

Year Total Paid Benefits % Estimated as Fraudulent
2019 $28.9 billion 4-10%
2020 $895 billion 10-15%
2021 $450 billion 15-20%

So what‘s behind the massive spike in unemployment scams? Criminal networks have honed in on identity theft and sophisticated cybercrime tactics to attack state benefit systems, according to a 2021 FBI report. Agile fraud rings share schemes on the dark web and profit enormously from stolen funds.

Cybersecurity firm Agari estimates at least 65% of pandemic unemployment claims – totaling over $500 billion – were fraudulent. The shift to remote work and reliance on unsecured online and mail correspondence made the system highly vulnerable.

This perfect storm enabled criminals to siphon billions in taxpayer funds meant for out-of-work Americans. But with vigilance and quick reporting, you can protect your finances and credit if you‘re targeted.

Watch for these Unemployment Fraud Red Flags

Here are telltale warning signs that someone may have wrongfully filed for unemployment benefits in your name:

  • An IRS Form 1099-G arrives reporting unemployment income you didn‘t receive. This tax form is mandatory proof you‘ve been victimized.
  • You receive official notices from your state‘s unemployment office regarding a benefits claim you never filed.
  • Your employer contacts you about an unemployment application you didn‘t submit.
  • Money from the unemployment office appears in your bank account or on a prepaid debit card you didn‘t apply for.
  • Your mailing address is changed with the unemployment office without your consent.
  • Suspicious activity shows up on your credit report, like unfamiliar credit cards or loan applications.
  • You‘re denied benefits because records wrongly show you‘re already receiving them.
  • shady websites and emails solicit extensive personal information to "qualify" you for benefits.

Half of identity theft victims don‘t uncover the crime for over a year, according to a report by Javelin Research. So it‘s essential to monitor these warning signs closely and act at the first hint of fraud.

Steps to Take if You‘re a Victim of Unemployment Fraud

If you detect signs of unemployment identity theft, here are the critical next steps to take:

Report to Your Employer

  • Notify your employer about the fraudulent claim as soon as possible.
  • Provide details like the filing date and application status.
  • Maintain written records of all communications in case documentation is needed.

Contact Your State Unemployment Agency

  • Report the false claim to your state‘s unemployment insurance program.
  • Use the direct number for fraud investigations if available, or speak to a representative.
  • Act quickly, as states typically give a limited window to contest the charges.

File a Police Report

  • Submit an identity theft complaint with your local police department, county sheriff or the FBI‘s Internet Crime Complaint Center.
  • Ask for a copy of the police report to include with your fraud dispute letters.

Submit an FTC Affidavit

  • File your fraud report at, managed by the Federal Trade Commission.
  • Input details to create a helpful recovery plan and Identity Theft Report.

Enact Credit Protections

  • Place fraud alerts on your credit immediately to add scrutiny for new accounts.
  • Order your free annual credit reports to identify any suspicious activity.
  • Consider freezing your credit reports to fully block access to thieves.

Adjust Tax Withholdings

  • Update your W-4 form to boost tax withholdings. This avoids owing for taxes on fraudulent benefits.
  • Don‘t include any fraudulent unemployment income when you file your tax return.

Victims spend an average of 23 hours resolving identity theft issues, according to a 2022 report from While the process takes diligence, you won‘t be held liable for false claims.

How and Where to Report Unemployment Fraud

Reporting fraudulent activity is crucial for stopping further theft and clearing your name. Be sure to notify:

Your State Unemployment Agency

File your claim online or call. Key details to have:

  • Your full name and SSN tied to the claim
  • Address where the fraudulent claim was filed
  • Date the fake claim was submitted
  • Statement that you did not file and are an identity theft victim

The National Center for Disaster Fraud

Report pandemic-related fraud to this DOJ hotline:


The Federal Trade Commission

Submit your fraud report to the FTC at and save recovery documents.


If a false tax return is filed in your name, submit:

Form 14039 – Identity Theft Affidavit

Social Security Administration

Notify the SSA Office of the Inspector General if your SSN was misused.

U.S. Postal Inspection Service

Contact USPIS if your address was changed without your consent for fraudulent purposes.

It takes an average of 207 days for federal agencies to resolve fraud, per the FTC. Don‘t get discouraged if progress seems slow. Persistence pays off.

Pro Tips to Prevent Unemployment Fraud

Here are smart tactics to reduce your risk of unemployment scams:

  • File taxes ASAP – Beat scammers to the punch before they can submit a fake return.
  • Freeze your credit – Restrict access to your credit reports to prevent new account fraud.
  • Enable two-factor authentication – Strengthen online account security like your state unemployment login.
  • Shred documents – Safely dispose of anything with personal identifiable info rather than just tossing it.
  • Change passwords frequently – Don‘t reuse passwords and opt for maximum complexity.
  • Watch out for phishing – Avoid clicking suspicious links or attachments asking for information.
  • Monitor your credit – Check your credit reports routinely for any unusual activity.

Establishing layers of protection makes you an unattractive target. While no one can prevent all identity theft, reducing your exposure can help deter criminals.

Key Unemployment Fraud FAQs

How can I check for unemployment identity theft?

Contact your state unemployment agency to see if claims are falsely filed under your Social Security number. Or watch for any notifications, debit cards or deposits related to benefits you didn‘t apply for.

What happens once I report the fraud?

Your state unemployment department will investigate the allegations. If benefits were already disbursed, the agency will attempt to recover those funds. You won‘t be held liable for fraudulent claims.

How long does it take to investigate unemployment fraud?

Most states quote an investigation timeline of 4-6 weeks, but many currently take 2-3 months with pandemic backlogs. Follow up if you don‘t hear any update after a few months.

Can I still get benefits if I‘m an identity theft victim?

Yes, you should still qualify for legitimate unemployment benefits you applied for after reporting identity theft. Your claim may be briefly frozen during an investigation before payments resume.

Final Takeaway

Unemployment fraud carries serious financial risks if left unaddressed. Being vigilant to detect impersonation attempts quickly and reporting them swiftly limits the damage and headache caused by identity thieves. Don‘t let criminals steal the benefits you rightfully earned. Follow the guidance in this guide to take control and protect your identity.


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