I-Team: Unemployment Fraud Leads To Tax Nightmare For Cape Cod Couple

BOSTON (CBS) - Lisa and Paul Lawton filed their joint tax return before the deadline and thought they were all set with the government. But, within days of sending in the return, they got a notice from the Department of Revenue.

"Our taxes were incorrect and were being corrected to the tune of about $60,000 based on an unemployment claim," Paul said.

The only problem was neither Paul nor Lisa was ever unemployed during the COVID pandemic. Paul is an attorney who works in law enforcement and Lisa is a respiratory therapist with two jobs at two different hospitals.

"It's really upsetting," Lisa said. "I was never unemployed. Ever."

The Lawtons contacted the Department of Revenue and the Department of Unemployment Assistance to report the error and the fraud. They were told it appeared that Lisa's identity was stolen, and the thieves used her Social Security Number to apply for unemployment insurance benefits.

Nick Restuccia is a CPA with decades of experience in public accounting. "It's just a huge problem," Restuccia said. "It just becomes a nightmare when this happens."

Nick and other accountants say since the start of tax season they've received hundreds of calls from clients who also got the same letter from the Department of Revenue. For most folks just getting a notice from the Department of Revenue or the IRS is very disconcerting.

"Identity theft can follow you for a long time," Restuccia said.

The I-Team has been reporting on the widespread unemployment insurance fraud in Massachusetts involving both state and federal money. Officials say fraud believed to be in the hundreds of millions is still being uncovered and assessed in both programs.

Last December, Secretary of Labor and Workforce Development Rosalin Acosta testified at a Senate hearing about widespread fraud in the unemployment system. Telling lawmakers, "International organized crime brought to all states a level of sophistication and volume of criminal fraud never seen by any government entity."

Paul says he is now working to investigate his wife's case himself. "I am going to pursue it," Paul said. "It is confusing and aggravating for anyone especially a victim."

Lisa says she's concerned about the identity theft. "I don't know what is going to happen next," Lisa said. "Is there going to be another claim against me? Is it going to be something else? It's crazy I told co-workers about what happened, and they were nervous that they could be a victim as well. Anyone could be."

With the I-Team's help the Department of Revenue corrected the Lawtons' tax return and gave them their refund. They are still waiting for the IRS to do the same.

Accountants say anyone who got one of these letters could be asked to pay taxes on the money or could have refunds held up until the cases are resolved.

The Massachusetts Department of Revenue said there is no indication this is a widespread issue, and anyone who received the notice should send a secure message through MassTaxConnect. After reporting the issue to DOR, the taxpayer should then follow up with the Department of Unemployment Assistance by filing a report online or calling (877)-626-6800.