Watch out for scams involving discount utility services, million-dollar prizes and unemployment benefits

Inventive fraudsters talk victims into paying with gift cards for discounts on TV, phone and internet services. If you must pay to claim a million-dollar prize, it’s too good to be true. And fraudulent unemployment claims are on the rise.

Jessica Smith received a robocall promoting steeply discounted internet services. To secure the deal, she simply had to pay with a gift card and confirm her account information. She did as instructed, but she never got that promised discount. Instead, Smith was the victim of fraud, realizing later that criminals had acquired her personally identifiable information (PII). The thieves used it to access her financial accounts and email address. Then they applied for a loan in her name, withdrew money from her bank account and applied for credit cards.

This is a fictional case, but the scam is real. In April, the FTC issued a warning about fraudsters posing as sales staff for legitimate businesses making robocalls and offering up to a 50% discount on phone, TV or internet services. They instruct potential victims to pay with a gift card and may request their personal account information.

To avoid becoming a victim of this scam, the FTC recommends to:

• Slow down. Pause to fully consider the offer, and resist fraudsters’ insistence that you must act quickly.
• Do research. Contact the company that’s supposedly offering the promotion to confirm its authenticity.
• Avoid gift card payment requests. According to the FTC, only scammers will require payment via gift card.

If you encounter this or any other scam, inform the FTC at ReportFraud.ftc.gov.

Million-dollar prize scam

In an alert posted on the FTC website in March, the agency warned consumers about a scam involving a fake million-dollar cash prize. Fraudsters contact potential victims via phone, text message, email or social media to notify them that they’re eligible for a million-dollar cash prize. But to claim the prize they must send money first to cover taxes, reporting or handling. To add credibility to the scam, fraudsters might masquerade as magazine seller and sweepstakes company Publishers Clearing House or another well-known company.

In essence, fraudsters are using the promise of prize money to steal victims’ money or personal information. Victims of this scheme soon discover that the prize money doesn’t exist. According to the FTC, “No real company will make you pay to claim a prize. Only a scammer will.”

To avoid becoming a victim of this scam, the FTC recommends pausing to consider these questions:

• Are others complaining online? Type the name of the company or contest into a search engine and include the terms “review,” “complaint” and “scam.”
• Is this a message that others have received? If the offer came by mail, bulk rate postage indicates other people received it too.
• Do I have to pay or divulge PII to claim the offer? If so, it’s a scam. The FTC says only scammers will pressure you to wire money through Western Union or MoneyGram or to use Apple Pay, CashApp, PayPal, Zelle, gift cards or cryptocurrency to claim your prize.

Unemployment benefits scam

The Internal Revenue Service (IRS) is warning U.S. taxpayers of an increase in fraudulent unemployment claims filed by organized crime rings. The scam involves criminals using stolen identities and related PII to collect unemployment benefits.

The U.S. Department of Justice previously issued a notice in 2021 about fraudsters setting up fake websites masquerading as unemployment benefit websites and state workforce agency (SWA) websites. To execute the scheme, fraudsters pose as SWA agents and send emails and text messages instructing potential victims to visit fake websites to apply for unemployment benefits. After people enter their sensitive PII, fraudsters steal it.

U.S. states issue Form 1099-G, Certain Government Payments to legitimate recipients of unemployment benefits and to the IRS to report the amount of taxable compensation received and any federal income tax withheld from paychecks. The IRS lists these red flags of unemployment identity theft:

• A government agency mailed you information about an unemployment claim or payment and you didn’t recently file for unemployment benefits. This includes unexpected payments or debit cards issued by any state.
• You received an unexpected IRS Form 1099-G reflecting unemployment benefits. Box one on this form may show unemployment benefits you didn’t receive or an amount that exceeds your records for the unemployment benefits you did receive. The form may originate from a state in which you didn’t file for benefits.
• Your current employer receives a request for information about an unemployment claim filed in your name.

Anyone who believes they’re a victim of this scam should immediately report it to the state agency that issued Form 1099-G and request a corrected form. In addition, the IRS recommends using the resources available from the U.S. Department of Labor to report fraud to SWAs and to obtain a corrected Form 1099-G.

When filing your taxes, the IRS recommends including only income you received on your tax return, even if you haven’t received a corrected 1099-G from the state. The IRS also provides the following advice:

• While your unemployment identity theft claim is being investigated, the processing of your tax return shouldn’t be delayed.
• Don’t report the incorrect 1099-G income on your tax return.
• You don’t have to file Form 14039, Identity Theft Affidavit unless the IRS rejects your e-filed tax return because a duplicate return with your Social Security number is already on file.
• Victims of an unemployment benefits identity theft scheme should consider getting an IRS Identity Protection PIN, a six-digit number that helps prevent thieves from filing federal tax returns in the names of identity theft victims.

The IRS recognizes the important role that employers play in preventing unemployment fraud and advises them to:

• Respond quickly to state notices that its employees have filed unemployment claims, especially if the names on the notices aren’t employees.
• Beware of fraudsters’ misuse of the IRS-issued Employer Identification Number (EIN) to file jobless claims.
• File Form 14039-B, Business Identity Theft Affidavit if the company’s EIN is being used to generate fraudulent unemployment benefit claims.
• Write to the IRS to cancel the business tax account if the company is going out of business. This will help curtail the misuse of dormant EINs.

I’m here to help. Please use this information in your outreach programs and among your family members, friends and co-workers. As part of my outreach program, please contact me if you have any questions on identity theft or cyber-related issues that you need help with or if you’d like me to research a scam and possibly include details in future columns or as feature articles. I don’t have all the answers, but I’ll do my best to help. I might not get back to you immediately, but I’ll reply. Stay tuned!

Robert E. Holtfreter, Ph.D., CFE, is a distinguished professor of accounting and research at Central Washington University. He serves on the ACFE Advisory Council, the ACFE Editorial Advisory Committee and the ACFE’s inaugural CFE Exam Content Development Committee. In 2005 he received the ACFE’s Outstanding Achievement in Accounting award and the ACFE’s Educator of the Year award in 2006. Holtfreter was the recipient of the Hubbard Award for the best Fraud Magazine feature article in 2016. Contact him at doctorh007@gmail.com.