Mississippi paid out $118 million in improper unemployment claims, largely due to fraud and stolen identities

In this photo illustration, hands are seen counting US $100 bills.
In this photo illustration, hands are seen counting US 100 dollar bills.

  • A Mississippi state audit report found nearly $118 million in improper unemployment insurance payments.
  • The payments occured due to stolen identities, fraud schemes, and were sent to people in jail.
  • Axios reported that as much as 50% of stimulus money may have been stolen, largely due to fraud.
  • See more stories on Insider’s business page.

Americans received $600 weekly unemployment benefits under the CARES Act in March, but the Office of the Inspector General (OIG) found in May that a portion of those funds fell into the wrong hands due to failures in detecting fraud. Mississippi just affirmed those findings on a statewide level – with a number attached.

Mississippi State Auditor Shad White released a report on Tuesday that found the state had distributed $117,948,403 in improper unemployment insurance claims, or 5.5% of the claims distributed during fiscal year 2020. The report outlined the following characteristics of the incorrect payments:

  • Payments made to individuals who never had a reduction in wages;
  • Fraudulent payments due to stolen identity;
  • Payments made to people in jail;
  • And payments made due to international unemployment fraud.

White said in a statement that the report shows “it’s more important than ever to understand the mistakes that were made when money was flowing so freely during COVID.”

“Nearly every state I’ve talked to around the country lost millions of dollars to fraud out of their unemployment funds. Mississippi was no exception,” White added. “The federal government and state governments around the country do not need to repeat those mistakes the next time we have a recession.”

White is correct – a portion of stimulus funds, including unemployment benefits, have not reached the right people due to issues with fraud and technology errors. For example, the OIG found that $39.2 billion in CARES Act funds were likely wasted, citing inefficient state governments that failed to detect fraud.

And Axios reported earlier this month that as much as 50% of stimulus money may have been stolen, with Blake Hall, the CEO of ID.me, a fraud-prevention service, telling the news service that America has lost $400 billion to fraudulent claims.

Washington, Iowa, California and New York have also lost millions of stimulus dollars to fraud, Axios reported.

While the data on improper payments comes from March’s CARES Act, President Joe Biden’s stimulus law also included $300 weekly payments through September – although GOP-led states have been ending those unemployment benefits early.

Given that some Democrats are pushing for additional recurring stimulus payments and unemployment benefits, fraud will need to be addressed moving forward, according to the OIG. The office recommended more modernized technology to better detect fraudulent payments, along with working with states to help process claims.

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$39 billion of stimulus unemployment benefits were likely wasted by inefficient state governments, watchdog finds

unemployment insurance weekly benefits stimulus checks recession job losses coronavirus pandemic
Carlos Ponce joins a protest in in Miami Springs, Florida, asking senators to continue unemployment benefits past July 31, 2020.

  • The Office of the Inspector General estimated $39 billion in unemployment benefits from the CARES Act were wasted.
  • The watchdog cited insufficient staffing and antiquated technologies that failed to detect improper payments.
  • GOP-led stated are ending Biden’s $300 weekly benefits early to get people back to work.
  • See more stories on Insider’s business page.

Under the CARES Act in March, Americans received $600 weekly unemployment benefits to help offset the financial strain brought on by the pandemic. But a recent report from the federal watchdog found states had difficulty distributing those benefits and likely ran up $39 billion in improper payments.

On May 28, the Office of the Inspector General released a report analyzing how states implemented key unemployment insurance programs from the CARES Act, including Pandemic Unemployment Assistance (PUA), Pandemic Emergency Unemployment Compensation (PEUC), and Federal Pandemic Unemployment Compensation (FPUC).

The report noted that since 2008, unemployment benefits programs have run an improper payment rate of 10%, and if that continues, “at least $39.2 billion in CARES Act funds will have been improperly paid and wasted, instead of benefitting those for whom the new UI [unemployment insurance] programs were intended.”

It also found that the Labor Department’s oversight did not ensure states implemented the programs and paid benefits promptly. “As a result, unemployed individuals experienced financial hardships due to delays in receiving benefits,” the report said. “As of January 2, 2021, we estimated at least $39.2 billion in improper payments, including fraud, were at risk of not being detected and recovered, and could have been put to better use.”

Here are the main findings of the report:

  • From the passage of the CARES Act to to the first payment claim, it took on average 50 days for PEUC, 38 days for PUA, and 25 days for FPUC to be distributed;
  • 40% of states did not perform required crossmatches to detect improper payments;
  • 42 states did not report overpayments, and
  • Of the states that did report, the total amount reported was understated by 89%.

The watchdog said the problems with the program were likely due to insufficient staffing levels and antiquated technology that hindered detection of fraudulent payments.

While this report analyzed unemployment benefits distribution under President Donald Trump, it comes at a time when an increasing number of GOP-led states are ending President Joe Biden’s $300 weekly benefits early following a weak April jobs report, with the argument that the benefits disincentivize work.

However, Insider reported last week that May saw an increase in payrolls, and that data was collected before the benefit cuts went into effect, suggesting they might not be discouraging work as much as Republicans argue.

Some Democrats are even pushing for continued unemployment benefits tied to economic activity beyond the pandemic, although Biden said in a speech on Friday that while the benefits have been effective thus far, “it makes sense” for them to expire in September.

“A temporary boost in unemployment benefits that we enacted helped people who lost their jobs through no fault of their own, and who still may be in the process of getting vaccinated,” the president said in brief remarks following the May jobs report. “But it’s going to expire in 90 days – it makes sense it expires in 90 days.”

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1.2 million people still haven’t cashed their first stimulus check

In this April 23, 2020, file photo, President Donald Trump’s name is seen on a stimulus check issued by the IRS to help combat the adverse economic effects of the COVID-19 outbreak, in San Antonio, Texas.

  • The Boston Herald found that 1.2 million of the $1,200 stimulus checks remain unspent.
  • The IRS said those people either refused to accept, paid back, or haven’t cashed the check.
  • Republicans have suggested using unspent COVID money to fund infrastructure, which Democrats strongly oppose.
  • See more stories on Insider’s business page.

As a growing number of Democrats are pushing for recurring stimulus checks beyond the three that Americans have already received, the Boston Herald found 1.2 million people still haven’t spent their first $1,200 check, from all the way back in March 2020.

Under the CARES Act passed that month, most Americans received a $1,200 stimulus check to help ease the financial pain of the pandemic. The Herald reported on Sunday that 1.2 million people have yet to spend those checks, citing records obtained from the Internal Revenue Service (IRS). The records show that California leads the country with 123,265 unspent stimulus checks, followed by Florida with 92,018 unspent checks.

The IRS told the Herald that the figures reflect “the number of people who either refused to accept, paid back or not cashed the stimulus checks they received from the IRS as a result of the CARES Act that was signed into law on March 27, 2020” by President Donald Trump.

Unspent COVID-19 relief money supports Republican lawmakers’ arguments that more money should not be spent on things like infrastructure until money already allocated from pandemic relief bills gets put to use. For example, House Republican Whip Steve Scalise cited in February the Committee for a Responsible Federal Budget’s COVID Money Tracker that found $1 trillion of pandemic relief funds are unspent.

“There’s over a trillion dollars of money unspent from previous relief bills that were bipartisan,” Scalise said Feb. 21 on ABC’s This Week.

However, the CRFB noted that figuring out how much money is actually unspent is complicated because much of it is already allocated and scheduled to be spent.

More recently, a growing number of GOP-led states have moved to cut off $300 weekly unemployment benefits early, and Sen. Shelley Moore Capito has suggested using those unspent funds to fund infrastructure.

“I think there’s all kinds of different ways that we’re looking at. Certainly repurposing some of those covid dollars,” she told Bloomberg. “I’ve been looking at those 21 states that are no longer paying the enhanced unemployment – why don’t we repurpose those dollars to help those folks coming off unemployment get work in an infrastructure plan.” The White House has dismissed such suggestions.

Even though 1.2 million stimulus checks remain uncashed, a growing number of Democrats are pushing for checks to be recurring, along with extended unemployment benefits, to sustain economic recovery. A recent report from the Economic Security Project found that sending two more rounds of stimulus checks could keep 12 million more Americans out of poverty, which is why in March, 21 senators wrote a letter to Biden advocating for recurring direct payments. Last week, seven House Democrats wrote a similar letter pushing for the same thing.

“The pandemic has served as a stark reminder that families and workers need certainty in a crisis,” the House Democrats wrote. “They deserve to know they can put food on the table and keep a roof over their heads. They should not be at the mercy of constantly shifting legislative timelines and ad hoc solutions.”

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‘Deely Nuts,’ ‘Beefy King,’ and other fake businesses reportedly got $7 million in COVID-19 PPP loans through one lender

biden burgers
President Joe Biden.

  • Fake firms collected $7 million in COVID-19 small business relief through online lender Kabbage, ProPublica found.
  • Most fake businesses were registered as farms, with names including “Deely Nuts” and “Beefy King.”
  • Kabbage processed 378 loans to fraudulent companies via the Paycheck Protection Program, ProPublica reported.
  • See more stories on Insider’s business page.

Fake businesses received a collective $7 million in federal COVID-19 relief loans last year through online lending platform Kabbage, and most were registered as farms, according to an investigation by ProPublica.

Kabbage processed 378 loans to bogus businesses under the Paycheck Protection Program (PPP) in the scheme’s first round of funding from March to August last year, the investigation found. Non-existent farms claiming to be based in New Jersey, such as “Ritter Wheat Club” and “Deely Nuts,” each received $20,833, the maximum loan available to sole proprietorships, ProPublica reported.

The Coronavirus Aid, Relief, and Economic Security Act (CARES), passed in March 2020, funded the PPP scheme, and was intended to to help struggling businesses keep employees on their payroll and stay afloat during the pandemic.

The investigation also found that “Beefy King,” a fake cattle ranch registered in New Jersey, filed for a $20,567 loan. The money was registered to the address of Joe Mancini, mayor of Long Beach Township, who denied any knowledge of the application.

“There’s no farming here: We’re a sandbar, for Christ’s sake,” Mancini told ProPublica on the phone.

ProPublica checked New Jersey business records for the farms and found that none of them existed. Hundreds of PPP applicants across 28 states didn’t show up in state registration records, and other lenders had nonexistent businesses on their books too, not just Kabbage, ProPublica reported.

The story is part of a wider problem: The Small Business Administration, which connects business owners to lenders, estimated in January that it approved loans for 55,000 potentially ineligible businesses, and that 43,000 received more money than needed for their payrolls.

ProPublica started investigating the loans after a New Jersey resident got in contact, saying his name was attached to a Kabbage loan linked to a “melon farm.”

The lender, which American Express acquired in August last year, processed nearly 300,000 loans in the first round of PPP funding, according to ProPublica.

“At any point in the loan process, if fraudulent activity was suspected or confirmed, it was reported to FinCEN, the SBA’s Office of the Inspector General and other federal investigators, with Kabbage providing its full cooperation,” Kabbage spokesman Paul Bernardini told ProPublica in an emailed statement.

Kabbage did not immediately respond to Insider’s request for comment.

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If you were overpaid unemployment insurance, the Biden administration says you should be able to keep some

GettyImages 1210101977
A person files an application for unemployment benefits on April 16, 2020, in Arlington, Virginia.

  • The US Department of Labor issued guidance Wednesday that lets states waive recovery of unemployment insurance overpayments.
  • “In many cases, individuals received payments for which they may not have been eligible through no fault of their own,” the department’s Suzi LeVine said.
  • States that already collected repayments should give that money back, the department said.
  • See more stories on Insider’s business page.

When COVID-19 hit the United States, millions of Americans were thrown out of work – some 14 million between February and May 2020 alone – with claims for unemployment following in kind. Governments, and applicants, made mistakes: according to a recent report, states ended up doling out $6.2 billion in overpayments.

Now the US Department of Labor has issued guidance to states that recommends letting people keep that extra money, so long as they did not commit fraud to get it.

“Amid the pandemic, state Unemployment Insurance programs did the best they could in the face of unprecedented demand as millions of Americans filed claims for benefits,” Suzi Levine, the department’s principal deputy assistant secretary for employment and training, said in a statement on Wednesday.

“In many cases,” she said, “individuals received payments for which they may not have been eligible through no fault of their own.”

Under the first round of COVID-19 stimulus, known as the CARES Act, the federal government provided unemployed workers an extra $600 in benefits above the amount they would normally have received from their state alone. That money came with a requirement for states to address fraud, with this week’s guidance noting that those who are found to have lied must still pay back their money with 15% interest and possible criminal prosecution.

It wasn’t until last December, however, that Congress allowed states to decide whether or not it was worth their time – and morally correct – to demand that money back in every case, per CNBC; in Texas alone, 260,000 people were asked to do just that between March and October 2020, the network reported.

According to the department’s new guidance, such waivers should indeed be issued when the recipient did nothing wrong and when “repayment would be contrary to equity and good conscience.”

And if a state has already recovered the money, prior to this guidance? It should, generally, go ahead and give it back, the department said.

States, not the federal government, will ultimately make the call. But, LeVine said, they now have “greater flexibility to forgo recovery of improper payments from honest workers who continue to struggle,” allowing them to focus on those cases “where real fraud exists.”

Have a news tip? Email this reporter: cdavis@insider.com

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Trump-era stimulus let corporations claim $14 billion in tax refunds, watchdog says

IRS office
  • Tax breaks included in the CARES Act let corporations receive $14 billion in refunds, the GAO said.
  • Roughly 1,200 firms received refunds worth more than $1 million, according to the Wednesday report.
  • The CARES Act won bipartisan support, but Democrats have since slammed the breaks as poorly targeted.
  • See more stories on Insider’s business page.

The Internal Revenue Service (IRS) will dole out $14 billion in tax refunds to corporations thanks to controversial provisions included in last year’s CARES Act, the Government Accountability Office (GAO) said Wednesday.

The $2.2 trillion stimulus package signed by President Donald Trump in the early stages of the pandemic included a swath of measures aimed at reducing tax burdens for struggling businesses. Tenets included carrybacks for business losses and refunds linked to the Alternative Minimum Tax.

The IRS has already received more than 41,000 cases from businesses looking to access refunds through either, or both, of the two tax breaks, according to a GAO report. Roughly $14 billion in related refunds were approved by the end of last year. Of that, about $11 billion has already been distributed.

Yet while the tax breaks included in the CARES Act were touted as ways to keep small businesses afloat, many of the companies filing for relief are winning massive refunds. Nearly 3,000 companies filing for refunds received between $100,000 and $999,000, according to the report. And roughly 1,200 firms got refunds worth more than $1 million.

Bloomberg first reported on the tax break.

US tax law allows businesses to use net operating losses from unprofitable years to cancel out future tax bills in a carryover process. The CARES Act widened this provision to allow operating losses to be carried back as far as five years, effectively letting companies hit by the pandemic dodge some tax burdens.

The CARES Act passed in March 2020 on a nearly unanimous basis, but Democrats have since criticized some of its tax breaks for issuing relief to wealthy companies and Americans. Some lawmakers have even called for the measures to be repealed.

Republicans, however, have pointed out that Democrats backed the bill’s passage and that similar policies have been used in past downturns.

The GAO’s report suggests the $14 billion in approved refunds are the tip of the iceberg for CARES-related tax breaks. IRS officials said in late January they received more than 12,000 more applications for carrybacks and credit refunds, but that they aren’t yet sure how many are related to the CARES Act. A backlog of revised tax returns could also add to the total amount refunded to corporations, the GAO said.

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WATCH: How small businesses can master their taxes in 2021

Filing taxes might be a bit different for small business owners this year. Many were greatly impacted by months of mandatory closures, lost essential revenue, civil unrest, government loans and grants, and layoffs. 

To find out what all these things mean for your taxes, small business reporter Jennifer Ortakales Dawkins talked with tax expert panelists. They covered how the pandemic, PPP loans, and revenue losses could impact your filings. 

Meet our panelists: 

Robbin Caruso is a partner in the tax department and the co-leader of the National Tax Controversy group of Prager Metis.

Nicole Davis is the founder and principal of Butler-Davis, a tax and accounting firm located outside of Atlanta, GA. 

Rick Lazio is the senior vice president of alliantgroup and a former US representative.

Topics covered: 

At 1:57 we go over basics like who is considered a small business and what the tax filing deadlines are depending on your business license. 

At 14:16 panelists explain what business owners should know about PPP loans and other types of federal aid and how those can affect your taxes. 

At 23:09 we cover how government-mandated closures affect business taxes,  what to do if your business deferred payroll taxes in 2020, and what pandemic-related expenses businesses can claim. 

At 33:00 panelists explain new, existing, and updated tax credits and incentives, including the Employee Retention Credit (ERC) and Research and Development (R&D) credits. 

And at 46:33 we go into a Q&A to respond to viewers’ questions as well as hear a few more tips from our panelists. 

Watch the full webinar above. For more information on filing your taxes as a small business, check out additional coverage below. 

Read the original article on Business Insider