'This Is Not Right': Pennsylvanians Being Hit By Tax Bills Due To Unemployment Fraud

Feb 17, 2021

Thousands of Pennsylvanians who were unemployed last year now owe federal taxes on their unemployment benefits. Other Pennsylvanians – some of whom were never unemployed – are receiving tax bills due to a widespread fraud problem.

Homewood resident Elizabeth Stanton lost her job last year, when the pandemic shut down food service at Carnegie Mellon University.

She was able to collect some funds from the state’s unemployment system, though she went several months without a check and didn’t get all the money she believes she was owed.

Stanton was also the victim of a nation-wide theft ring – fraudsters hit unemployment systems in several states, electronically stealing funds meant for out-of-work people.

Stanton was shocked when she received her tax form from the state.

And I'm saying this is not right. This is not correct. This is not what they gave me. You know, I don't understand what's going on with this,” she recalled.

Officials at Pennsylvania’s Department of Labor and Industry say anyone receiving a tax form for benefits they didn’t get should report it to the department.

It’s unclear how many people are impacted by this fraud.

On a call with reporters Tuesday, Acting Labor & Industry Secretary Jennifer Berrier declined to give a firm number of those who had their information improperly used or a dollar amount stolen by thieves, as did Pennsylvania Office of Attorney General chief deputy attorney general Brian Zarallo.

“Frankly, we have to wait for the investigations to conclude and for due process to play out as well. So I think it would be it would be not good for me to guess as to how much money that we've lost until … those things have concluded,” Berrier said.

So far, Zarallo said, the attorney general's office has arrested 29 people accounting for around $2.5 million in illegally acquired funds, though multiple investigations are ongoing, he said.

State Treasurer Stacy Garrity said Monday she estimates the identity theft issue could have hit more than 100,000 people in Pennsylvania, based on the volume of calls about the issue her office has received, as well as the volume of returned checks and pre-paid debit cards.

The state added a number of anti-fraud measures last year, though that also led to problems for legitimate out-of-work claimants.

Advocates like Barney Oursler of the Mon Valley Unemployed Committee, who has been assisting Stanton, says it has been nearly impossible for people in her position to reach anyone at the Department of Labor and Industry to help them.

Furthermore, the benefits shouldn’t be taxed in the first place, he said.

“Why do you tax people who are without a job by definition, when they're collecting unemployment?” Oursler said.