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In Light of EDD Fraud Failures, Harder Asks IRS for Answers on Tax Bills for Victims

WASHINGTON – In response to the California Employment Development Department’s (EDD’s) failure to identify and prevent identity fraud, Representative Josh Harder (CA-10) has asked the Internal Revenue Service (IRS) for answers regarding tax implications of that fraud in a letter. Many unsuspecting and innocent California residents have had their identities stolen and may not be aware of the crime until they receive a tax bill from the IRS. Rep. Harder wants to ensure the agency has a plan for quickly resolving these issues to prevent further damage to innocent Californians.

“The EDD is an absolute catastrophe – and the IRS isn’t known for its customer service, but we can’t have thousands of Californians getting a tax bill for benefits they didn’t get,” said Rep. Harder. “A lot of people don’t even know their identity was stolen – and won’t find out until they get a tax bill. We need the IRS to be ready to clean up EDD’s mess – and I’m working to make sure they are.” 

Representative Harder has been critical of EDD’s repeated issues. Beginning in May, Rep. Harder started applying pressure to the agency to get answers on payment delays and the agency’s decision to abruptly halting new claims in September. Last week, he asked for answers regarding the mass suspension of accounts which have prevented tens of thousands of Californians from getting their benefits.

The text of the letter is below and an original copy is available here.

Dear Commissioner Rettig, 

I write today to urge the Internal Revenue Service (IRS) to take proactive measures identifying and resolving the high number of unemployment identity fraud cases this tax season. There is a concern that my constituents will be left dealing with tax bills originating from fraudulent claims made in their names.

The fraud that has occurred in California is staggering. Our state’s Employment Development Department (EDD) has potentially distributed upwards of $8 billion in fraudulent claims since this pandemic began. For many affected, the Federal Bureau of Investigation (FBI) has said that they may only learn that they are victims of identity fraud when they receive an IRS Form 1099-G in the mail. As this has been an ongoing problem and the FBI first raised this concern in July of 2020, I write to inquire a response to the following questions:

  1. What is the IRS doing to proactively address unemployment identity fraud and minimize the burden on fraud victims?
  2. How are you working with unemployment departments, such as California’s EDD to resolve tax bills before they are sent to fraud victims?

The only guidance currently issued by your agency on unemployment benefit fraud is a simple alert stating that verified fraudulent claims should not be reported on the IRS Form 1099-G. This is insufficient guidance for victims. I urge you to create a streamlined and easy-to-understand process so that none of my constituents are lost disputing a fraudulent tax bill. As you know, this year’s tax season is fast approaching, so I urge quick action. Thank you for your attention to this critical matter and I look forward to your timely response. 

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