State still grappling with fake unemployment claims; tax season presents new headaches for victims

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DENVER — It’s a pervasive problem in Colorado. Scammers seem to be taking advantage of the COVID-19 crisis by filing fake unemployment claims using stolen identities. And now, those fraudsters are creating even more headaches as victims try to file their 2020 tax returns.

It happened to Dr. Corey Lyon, a family physician with the University of Colorado School of Medicine. First came the notice from his employer.

“I got a message from my H.R. director asking if I filed an unemployment claim, which I said, ‘No. What do you mean?'” Lyon said.

Lyon is not unemployed, yet someone was able to file an unemployment claim in his name.

“It’s an uncomfortable feeling,” he said. “You feel vulnerable. What else could they use my name for?”

It happened to one of his colleagues, too.

“She even received the debit card from the state,” Lyon said.

It is an ongoing and scary wrinkle in the state system. According to the Colorado Department of Labor and Employment (CDLE), in just the first week of January – of the 41,000 unemployment claims in our state, 16,000 appear to be fake.

MORE: Colorado Dept. of Labor predicts unemployment fraud will continue despite new identification system

Since the pandemic began, the state estimates it has paid out nearly $10 million in fraudulent unemployment claims.

Those most vulnerable are likely victims in a previous data breach, like the Equifax breach, which exposed thousands of social security numbers.

Adding insult to injury, Lyon received a 1099 tax form last week for unemployment payments he never collected.

“That was for $2,500 that now, I have to submit to my taxes, somehow,” Lyon said. “This is not income that I actually obtained.”

RELATED: Colorado labor department blames spike in new unemployment claims on fraud

Experts say traditional identity theft advice applies. Lock your credit and sign up for one of the credit monitoring services. You can also go a step further and create an online benefits account with the CDLE regardless of your employment status. That creates an obstacle for fraudsters because they can’t easily open a fresh account in your name.

“You sort of think that it can’t happen to you,” Lyon said. “I was definitely one of those people. Everyone’s a little bit, potentially at-risk. And then it also bothers me that someone is cheating the state out of unemployment benefits when people do need it.”

Lyon has filed fraud reports with the state and his local police department.

“I want to make sure that the message is out there to be aware and to protect yourself,” he said. “Take all the necessary steps to prevent it from happening. It’s widespread.”

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