Unemployment fraud happens when a criminal uses stolen personal information to collect unemployment benefits in someone else’s name. The government requires individuals to report this fraud type directly, but if you do fall victim, you can use our Unemployment Fraud Center to report and remediate the issue.

Unemployment benefits fraud is often discovered during tax season, when fraud victims receive tax documents about jobless benefits they never applied for.

Tax season typically runs from January through mid-April. Here at Allstate Identity Protection, we often see an uptick in requests for help with unemployment fraud during this time.

Read on to learn more about unemployment fraud — and how our Unemployment Fraud Center can help if you’re facing this type of government benefits fraud.

What is unemployment fraud?

Just as identity thieves may use stolen personal information like Social Security numbers to open credit cards or apply for loans, they may also use it to illegally claim unemployment benefits. 

When a criminal applies for and collects unemployment in someone else’s name, that’s unemployment fraud. 

While irregular credit activity might immediately trigger an alert, unemployment fraud activity is different. Victims may not discover the problem until weeks or months later, when they receive inaccurate tax documents or get a call from their employer about a suspicious claim for unemployment made in their name.

Why has unemployment fraud surged during the pandemic?

In March of 2020, the government expanded jobless benefits under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and a record number of Americans applied for aid. Soon after, states began experiencing a surge in fraudulent claims.

According to the IRS, many of those fraudulent claims were filed by criminals using stolen identities, turning thousands of Americans into victims of unemployment identity fraud.

How did scammers gain access to so many people’s personal details? When personal information is exposed in a data breach, it can wind up for sale on the dark web. As data breaches accumulate over time, the amount of exposed information may grow — which can make it easier for scammers to steal an identity. 

Following this surge, states have been working to improve processes for preventing and detecting government benefits fraud. That may be partly why unemployment fraud rates started to decline by late 2021. Still, it’s important to stay aware, particularly during tax season.

Fast Facts

How common is unemployment fraud?

In 2021, the Federal Trade Commission (FTC) received more than 395,000 reports from people claiming their information was misused to apply for a government benefit. This was the most reported fraud type for the year. 

Here at Allstate Identity Protection, we saw open cases of fraudulent unemployment benefits claims grow a whopping 88 percent from 2020 to 2021. Fortunately, cases started to drop in late 2021, and we’ve continued to see a downward trend in cases of unemployment fraud.

How is unemployment fraud detected?

It’s important to know how to detect unemployment fraud. Especially during tax season, keep an eye out for these signs that a criminal may have filed for unemployment in your name: 

  • You receive a 1099-G tax form in the mail about unemployment benefits you never applied for

  • You receive a letter from your state about unemployment benefits you never applied for

  • You apply for unemployment benefits, but your application is rejected because someone else is already collecting benefits in your name

  • Your employer alerts you that someone has filed for unemployment insurance in your name

Protecting yourself from unemployment fraud

One of the best things you can do to protect yourself against unemployment fraud is to put a lock on your Social Security number. 

You can do this by creating an account with E-Verify, an official website of the U.S. Department of Homeland Security. 

With E-Verify, you can place a lock on your Social Security number to help prevent it from being misused. You can also use the free service to monitor labor and employment inquiries made with your information.

The government requires individuals to report fraud directly. If you’re a member and you need more assistance, we can help guide you through this process. 

What to do if you experience unemployment fraud

If you think you may be a victim of unemployment fraud, you can report it online using our Unemployment Fraud Center, which offers step-by-step guidance on how to file a claim. 

Here’s how it works:

  • Visit the Unemployment Fraud Center and tap “I need help opening an unemployment fraud case”

  • Answer a few questions and we’ll create your personalized step-by-step claim list 

  • Follow the steps to file your unemployment case with the proper government agencies 

Throughout the process, you may need to work with your employer and the appropriate state agencies. 

Once your claim has been filed, you should expect to hear from your state’s unemployment insurance office within 30 to 60 days. Each state is different, but typically after that length of time, your case will be closed.