As officials work to address the escalation of fraudulent claims at the Employment Development Department (EDD), the Republican Senate caucus has called for the governor to ensure there’s a system to handle tax payment forms erroneously sent to victims of identity theft.
"Governor Newsom's unemployment department has failed Californians who have suffered during the pandemic through no fault of their own,” Senate Republican Leader-elect Scott Wilk, R-Santa Clarita, said in an email statement to the Northern California Record. “Now we learn that EDD is issuing 1099 tax forms to unknowing taxpayers who never filed an unemployment claim, but are victims of identity theft.”
Wilk, who is sponsoring EDD reform legislation, and the Senate Republican Caucus on Feb. 1 wrote to Newsom, urging immediate action for identity theft victims to make sure they’re not taxed for unemployment benefits they did not receive.
The letter followed the Jan. 28 report from the state Auditor detailing the EDD fraud damage and tax burden issues.
“EDD has inflicted great pain on people by not paying benefits in a timely manner, not paying at all, or through mismanagement issuing as much as $30 billion in fraudulent claims that will leave honest taxpayers with a federal tax liability,” Wilk told the Record. “Senate Republicans are asking the Governor to ensure EDD enacts the auditor’s recommendations with regard to fraud so that victims do not have to pay taxes on money that they did not receive or request.”
Tax liability was among the topics discussed at the Feb. 3 legislative oversight hearing on the EDD.
“The EDD has worked diligently to suppress a Form 1099G from being issued to as many confirmed identity theft victims as possible,” Loree Levy, EDD deputy director of public affairs, told the Record by email.
“Up until this pandemic, the most common form of fraud was claimants returning to work and continuing to collect unemployment benefits without properly notifying EDD as required,” Levy said. “Unfortunately, states were hit by an onslaught of sophisticated scammers sitting on a treasure trove of stolen identity information from the dark web.”
The EDD estimates 95% of the fraud committed has occurred in the federal Pandemic Unemployment Assistance (PUA) program.
The state auditor report noted the EDD did not have effective safeguards in place.
The EDD on Monday tweeted that it had set up a designated phone line and web address as part of its response efforts regarding 1099G forms and other topics.
Copied on the Senate Republicans’ letter to Newsom was Julie Su, who is secretary of the California Labor and Workforce Development Agency – the parent agency of the EDD – as well as EDD Director Rita Saenz, who Newsom appointed on Dec. 30.