Interesting scenario: What do you guys and gals think?

[PATAX]

Finishing up a 2021 tax return that was just dropped off,  and there is an unemployment compensation income form 1099G from PA for a little over  $10,300 , and then I noticed it was for 2020 and NOT 2021. I called the client to inquire about it, and she NEVER received any unemployment as she is retired, so it is obviously fraudulent, and someone collected unemployment in her name in 2020. I told her to call PA as soon as possible, and to check her bank accounts and Investments to be safe and anything else. If this was legitimate, most of this would be excluded from federal tax due to the 2020 exclusion of $10,200, but because she receives Social Security she would owe about $700 (due to increase in taxable Social Security benefits), if she did really receive it. Because it is fraudulent, obviously she does not owe anything to federal. ( PA does not tax unemployment benefits ) . It has been over a year now since 2020 return filed and she never received an IRS "notice". Do you guys think that Pennsylvania rescinded this form and notified IRS, if and when they became aware that it was fraudulent? I would think that the person who did this, probably did it to a bunch of people, and may have had the money deposited into one account, and Pennsylvania may be aware of this, and the individuals who had unemployment collected in their names deposited into this account, and PA then corrected, i.e. voided, the 2020 Forms 1099G? What do you all think? Thanks, I appreciate it.

[dkh · Accepted solution]

I had similar - client received 1099G from neighboring state.  With the client in my office, we called the state to report the fraud.  Client received a corrected 1099G within 30 days.