Unemployment Insurance Should Not Be for the Fraudster

The Department of Labor estimates that $4 billion in unemployment claim overpayments are handed out each year to individuals who are guilty of small scale unemployment tax fraud.  The message here: Unemployment tax fraud is easier than it ought to be.  Steal a Social Security number and file a false unemployment claim and you can receive $400 per week for 26 weeks.

With investigators overwhelmed and systems not as sophisticated as they need to be, the risk of getting caught is low.  On top of that, the ability to make an unemployment claim over the phone or on the Net makes this a faceless crime.  When this money is so easily stolen, businesses suffer because payroll taxes have to go up to fill the gap.

Here’s what you can do to help minimize payroll tax fraud:

Vigorously protect your employee Social Security numbers.

Payroll tax frauds typically start with a misappropriated Social Security number.  Fraudsters are not beyond diving in office dumpsters looking for payroll records and Social Security numbers.  Shred any document with any employee.  Other precautions include locking file cabinets, password protecting computers that have sensitive, and purchasing security software that will maintain firewalls and protect your email accounts.

File payroll forms in a timely manner and respond promptly to all unemployment agency inquiries.

If a claimant has a new job and continues to accept unemployment, the state will catch the fraud only if the new employer has filed the appropriate new hire forms required by the state.  When one of your employees files an unemployment claim, the state will notify you.  You’d be surprised how many business owners never respond.  As a result, the claim gets paid even if the claimant is a criminal perpetrating identity fraud and the real employee is still employed at your business.

Report fraud.

If you are aware of anyone perpetrating unemployment tax fraud, contact the state unemployment agency. New York: (888) 598-2077; New Jersey: (609) 292-9447; Connecticut: (860) 263-6325.