It could take up to a decade to determine how many fraudulent claims came through Nevada’s unemployment insurance system during the pandemic, according to a spokesperson for the Department of Training, Employment and Rehabilitation (DETR) which oversees the program.
This week, DETR officials said Nevadans could help in identifying some of those fraudulent claims as they receive tax forms in the mail.
People who received either unemployment insurance (UI) or pandemic unemployment assistance (PUA) in 2021 will receive a Form 1099-G form in the mail in the coming days–or two if they received money from both programs–which they can use to report income when filing their taxes.
Some of those forms will have inaccurate totals, DETR officials said, the result of potential fraud in the system.
DETR officials are urging recipients to report the inaccuracies both to file their taxes correctly and to help weed out the fraudulent claims to the system.
“DETR is aware of and understands the concerns and questions claimants may have regarding receipt of an inaccurate 1099-G form due to potential fraud. Anyone who believes they have received an incorrect Form 1099-G from DETR can file a report online,” the agency wrote in a statement.
How big is the fraud problem?
“In five states — Arizona, Georgia, Hawaii, Nevada and Rhode Island — the initial claims outnumbered the entire pool of civilian workers.”
In August 2020, Gov. Steve Sisolak’s “Rapid Response Strike Force” was formed to identify issues within the state’s unemployment system and make recommendations to improve its operations. By May of 2021 they released their findings, which included an estimate of at least 400,000 fraudulent UI/PUA claims.
That could be just a fraction of the total fraudulent claims to the system.
Heidi Saucedo, a public information officer for DETR’s Employment Security Division, put the magnitude of the potential fraud into perspective.
“Before the pandemic, Nevada had about 1.6 million people in the workforce. When COVID prompted the closure of businesses to protect people’s health, Nevada experienced an immediate spike in unemployment which hit just under 30%,” she said. That would mean just under a third of Nevadans could be applying for UI–or 500,000 people.”
Using business license information, DETR estimated another 75,000 to 150,000 claims would be filed for PUA benefits, reserved for self-employed workers and independent contractors.
Saucedo said about 500,000 people received at least one week of UI benefits and over 150,000 people received PUA benefits.
However, she added, “DETR received over 2 million initial applications for unemployment benefits.”
The agency paid out over $13 billion in unemployment benefits during the pandemic.
“Due to the sheer volume of claims, the number of organized fraudulent actors and the complexity of new benefit programs being created, some number of improper payments have gone out,” Saucedo said.
“The biggest fraud wave in U.S. history”
Nevada is far from alone when it comes to UI fraud. Last year ProPublica reported on the explosion of UI fraud during the pandemic, with federal prosecutors saying it “may turn out to be the biggest fraud wave in U.S. history.”
From ProPublica:
“Nobody has yet come close to putting a definitive number on the dollar value of fraud relating to pandemic-era unemployment benefits. But ProPublica performed a data analysis that hints at the massive scope. In state after state, the volume of initial jobless claims has far exceeded the number of estimated job losses. Across the U.S. from March to December 2020, the number of initial claims equated to 68% of the country’s labor force, which stood at around 164 million before the pandemic. In five states — Arizona, Georgia, Hawaii, Nevada and Rhode Island — the initial claims outnumbered the entire pool of civilian workers.”
It’s possible, the report notes, that some workers may have filed for UI benefits twice in one year if they’d lost a job more than once that year. However, that can’t explain away the sheer volume of claims filed or the amount of money paid out.
The U.S. Department of Labor’s Inspector General told ProPublica that at least $87 billion in fraudulent payments were processed through the nation’s UI system during the pandemic.
That’s likely a conservative estimate, they added.
What’s being done
Saucedo said DETR is working with local, state and federal law enforcement agencies who are investigating and prosecuting fraudsters.
She said the state is also recovering funds from imposter claims as investigations and hearings are completed.
The process isn’t swift, however. The Department of Labor has a process that has to be followed before a claim can be marked as fraudulent.
“Because we will need to adjudicate these cases, provide due process as well as complete the appeals reviews, DETR and the State of Nevada anticipate it could take up to a decade to sort out the final number and amount of imposter claims and fraudulent unemployment payments paid out,” Saucedo said.
And that’s where claimants receiving their 1099-G forms can help out. Those who receive an incorrect Form 1099-G can file a report online at www.detr.nv.gov, select the Unemployment Fraud tab, and complete the 1099-G Correction Request.
DETR officials said once the request is filed nothing else needs to be done by the reporting party, but DETR will investigate the claim and reissue corrected forms.
“If claimants do not receive a corrected 1099-G in time to file their taxes, the IRS recommends that they file their tax return with the correct amount and have documentation ready if the IRS contacts the filer about the discrepancy,” DETR officials added.
DETR provided additional tips for Nevadans receiving Form 1099-G:
- It is important to accurately report the income actually received from UI or PUA on your tax return and keep a copy of the income notice sent to the IRS and all related records for the federal agency.
- A list of identification documents recommended by DETR are online at
https://detr.nv.gov/Page/Unemployment_Fraud under “Additional Resources.” - Filers should keep all documents as it may take up to a year before the IRS makes contact.
- If you discover your tax return was incorrect after it is filed, you must file an amended return. The IRS may charge penalties and interest if you do not pay the correct amount of federal tax to the IRS by April 15, 2022.
