What is Unemployment Identity Theft and How to Know If Your Benefits Are Being Stolen

Unemployment identity theft has become a widespread issue across multiple states in the U.S., with criminals assuming the identities of innocent individuals to file fraudulent unemployment insurance claims. These criminals employ various tactics to acquire stolen personal information, such as purchasing it online, exploiting previous data breaches, engaging in phishing schemes, and even resorting to physical theft. 

To further compound the problem, victims often remain unaware of the theft until they attempt to file unemployment insurance claims, receive notification from state agencies or employers about fraudulent activity, or discover discrepancies in their tax forms. This worrying development emphasizes the need for greater awareness and preventative actions to deal with this hidden threat and shield people from dire financial repercussions.

What is Unemployment Identity Theft?  

The false application for and receipt of unemployment benefits is known as unemployed identity theft. It involves the unauthorized use of another person’s personal information, including their name, Social Security number, and other pertinent specifics. When a person’s name is stolen and used fraudulently to file unemployment claims, oftentimes without the victim’s knowledge, identity theft has occurred. The perpetrator then collects the fraudulent benefits. 

At the same time, the victim may remain unaware until they encounter issues with their legitimate unemployment claims or receive notifications from government agencies or employers regarding suspicious activity. It can also have serious financial and legal consequences for the victims, requiring immediate action to mitigate the damage and protect their personal information.

Unemployment ID Theft vs Traditional ID Theft 

Traditional identity theft and unemployment identity theft are two distinct forms of identity theft, each with its own focus and impact. Unemployment identity theft targets personal information for fraudulent acquisition of unemployment benefits, while traditional identity theft encompasses a broader range of fraudulent activities. The impact of unemployment identity theft primarily affects victims’ financial well-being and can result in disruptions to unemployment benefits and tax implications. 

Traditional identity theft, on the other hand, has wide-ranging consequences, including credit damage, debt accumulation, legal troubles, and emotional distress. Detection and prevention strategies differ for each type, and resolving unemployment identity theft involves reporting fraud and restoring benefits. In contrast, traditional identity theft requires credit monitoring, reporting fraud to authorities, and restoring creditworthiness. Understanding these differences is crucial for individuals to protect themselves and take appropriate measures against identity theft. Get the complete breakdown of what is identity theft.

Unemployment ID Theft vs Employment ID Theft 

Unemployment identity theft involves the fraudulent acquisition of unemployment benefits using someone else’s personal information, impacting their financial well-being. On the other hand, employment identity theft entails the fraudulent use of an individual’s identity to gain employment, leading to potential legal and tax-related issues. 

While unemployment identity theft focuses on diverting funds for the unemployed, employment identity theft has broader implications for the victim’s employment history and legal standing. Vigilance in safeguarding personal information and prompt reporting of any suspicious activity is essential in combating both forms of identity theft. For more information, check out our article that details what is employment identity theft.

How Unemployment Identity Theft Works 

Unemployment identity theft operates through various methods and stages. However, it generally begins with a cybercriminal stealing your personal information. With that, they then file unemployment claims in your name. Once their claims are processed and approved, they have to redirect the unemployment benefits (or funds) to their own bank account so that they can access and use the money. 

Here’s a breakdown of how this type of identity theft typically works:

1. Acquisition of Personal Information: The identity thief employs many strategies to get personal information such as Social Security numbers, names, addresses, and other identifying details. This can include purchasing stolen personal information on the dark web, exploiting data breaches, conducting phishing attacks via email or phone, or physically stealing data from individuals or third-party sources.
2. Filing fraudulent claims: Armed with stolen personal information, the thief files false unemployment claims using the victim’s identity. Depending on the processes within the targeted jurisdiction, they may submit the claims online or through other methods.
3. Diversion of Funds: Once the fraudulent claim is approved, the thief reroutes the unemployment benefits to accounts they control, often using third-party intermediaries or convincing individuals who may be victims of scams, to transfer the funds to the criminal’s accounts. The thief may also set up direct deposits or receive prepaid debit cards in the victim’s name to access the benefits.
4. Unawareness by the Victim: Victims often remain unaware of unemployment identity theft until certain triggers occur. This can include the victim attempting to file their legitimate unemployment claim and discovering it has already been filed, receiving notifications from state unemployment agencies or employers about suspicious activity, receiving an IRS Form 1099-G indicating benefits collected from unemployment insurance, or being informed by their employer about a claim filed while still being employed.
5. Consequences and Resolution: Victims of unemployment identity theft face significant consequences, including disruptions to unemployment benefits, potential tax complications from falsely reported benefits, and potential damage to their employment history. Resolving the theft requires immediate action, such as reporting the fraud to the relevant state unemployment agency, notifying law enforcement, freezing credit if necessary, and working with authorities and financial institutions to restore the victim’s identity and rectify any financial or legal repercussions.

Understanding how unemployment identity theft operates can help you identity it and prevent it.

Ways to Detect Unemployment ID Fraud  

Although recognizing unemployment identity theft can be difficult, there are many things people can do to be alert for potential warning indicators. There are several methods to spot identity theft related to unemployment, such as reviewing your unemployment benefits documentation, monitoring your financial statements, and tax documents, and learning to spot phishing scams. 

Here are some ways to detect unemployment ID fraud: 

• Review Unemployment Benefit Communications: Regularly check your mailbox, email inbox, and online accounts for any notifications or correspondence related to unemployment benefits. Receiving notifications or forms indicating benefits you did not apply for or receive could be a sign of fraudulent activity.
• Monitor Your Financial Statements: Attention to your credit card and bank account activity closely. Look for any unfamiliar deposits, withdrawals, or purchases that could be related to fraudulent unemployment benefits. Be particularly vigilant if you notice deposits from unfamiliar sources or if unemployment benefits are deposited into an account you didn’t authorize.

• Review Tax Documents: Carefully examine your tax documents, including the IRS Form 1099-G, which reports government payments you received. If the form shows unemployment benefits you didn’t receive, it may indicate unemployment identity theft.
• Stay Updated on Employment Status: Take note if your employment status changes without your awareness. For example, if you are employed and receive notification from your employer or state agency that an unemployment claim has been filed in your name. Report it immediately and take the necessary steps to address the situation.
• Monitor credit reports: Regularly review your credit reports from major credit bureaus. Look for any unfamiliar accounts, inquiries, or discrepancies that could be associated with unemployment identity theft. Get the step-by-step instructions on how to get your free credit report from Experian, Equifax and TransUnion. 
• Be Alert to Phishing Attempts: Be cautious of phishing emails, text messages, or phone calls requesting personal information or claiming to be from government agencies or financial institutions. Legitimate companies rarely request sensitive information through unwanted mail. Learn more about phishing scams and how to spot them. 

Additionally, if something feels off or suspicious regarding your unemployment benefits or personal information, trust your instincts and investigate further. Prompt action can help mitigate the damage caused by identity theft.

How to Protect Against Unemployment ID Fraud [7 Ways] 

Protecting yourself against unemployment identity fraud requires proactive measures to safeguard your personal information. For example, keep sensitive information confidential, be careful when using the internet, monitor your credit reports and financial statements, be on the lookout for unsolicited mail, and report any suspicious activity.  

Here are the leading ways to help safeguard your identity and protect against unemployment ID fraud: 

1. Keep personal information confidential 

Safeguard your personally identifiable information (PII) without unnecessarily sharing it. Be cautious about providing sensitive details online, over the phone, or through email, especially regarding your Social Security number (SSN), date of birth, and financial information.

2. Maintain Good Cybersecurity Practises 

You may increase your online security by developing strong, one-of-a-kind passwords for each account. Enable two-factor authentication whenever possible. Avoid clicking on dubious links or downloading attachments from unreliable sources, and be wary of phishing attempts. Update all of your hardware and software with the most recent security fixes.

3. Review Your Credit Reports

Regularly review your credit reports from the major credit bureaus (Equifax, Experian, and TransUnion). Look for any unauthorized accounts or suspicious activity that could indicate identity theft. You are entitled to one free credit report per year from each credit bureau; to get yours, visit AnnualCreditReport.com.

4. Monitor Financial Statements

Review your bank statements, credit card statements, and other financial records. Look for any unfamiliar transactions or charges that could be linked to fraudulent activity. Inform your financial institution of any inconsistencies right away.

5. Watch for Unsolicited Mail 

Be wary of unauthorized emails, calls, or texts requesting personal information. Legitimate organizations will not typically request sensitive details via these channels. If you receive such requests, independently verify the authenticity of the communication before providing any information.

6. Secure Important Documents

Safely store physical documents containing sensitive information, such as Social Security cards, passports, and financial statements. Consider using a locked drawer or a secure safe for added protection.

7. Report Suspicious Activity Promptly 

If you suspect unemployment identity theft or any form of identity theft, report it immediately. You can file a report to the relevant authorities, such as your state unemployment agency, local law enforcement, and the Federal Trade Commission (FTC). Prompt reporting is crucial for limiting the potential damage and starting the resolution process.

Bottom Line 

Unemployment and identity theft poses a significant risk to everyone. Individuals can better protect themselves from this threat by following proactive measures. For example, keep personal information confidential, maintain good cybersecurity practices, and regularly review credit reports and financial statements. Prompt reporting of any suspicious activity is crucial for minimizing the impact of identity theft. By staying informed, vigilant, and proactive, we can mitigate the risks and safeguard our financial well-being and peace of mind.

Frequently Asked Questions (FAQs)