Employment-related identity theft occurs when someone uses another individual’s personal information, such as a Social Security number, to get hired for jobs and earn income illegally. In many cases, the victim doesn’t know their identity has been stolen until they receive tax forms from companies they didn’t work for.
This issue is a growing problem in the U.S. About 31,450 people reported wage-related identity theft to the Federal Trade Commission in the first three quarters of 2025. According to federal data, this was a 61% rise from the same time period in 2021.
Mysterious 1099s aren’t a new issue, but they’ve become slightly more common in recent years within the gig economy. These scams are more common where jobs are performed remotely, leading to less interaction between companies and their contractors.
Employment identity theft victims need a corrected 1099 showing $0 earned from the issuing company to be filed with the IRS and the appropriate state agency. Otherwise, the Service or the state agency will probably flag the returns for missing income, and charge additional tax, interest, and penalties when it is filed.
But getting the issuing company to amend the 1099 may be difficult. If you were to receive one of these mystery 1099’s, how would you prove to the company that you never worked there?
This could be a situation where the offender never even sat down with an interviewer. And if you were the employer, who would you believe?
Resolving tax-related identity theft issues is extremely difficult and time consuming. The IRS took about 21 months on average during fiscal 2025 to resolve these cases. And given the recent layoffs, that average will probably only increase.
Whenever there are issues that remain unsolved at the Service, taxpayers normally send them to the Taxpayer Advocate Service (TAS) for resolution. During fiscal year 2025, TAS received 10,897 of these cases.
This is a problem, given the new gig economy, that will probably only grow.
Let me leave you with this…
I’m writing about this because it just happened to one of my clients, a highly paid entrepreneur in the Consulting Industry. She received a $4,500 1099 from one of the larger ride-hailing app companies this year.
Over a month ago she contacted the company and requested a zeroed out 1099. So far, no action seems to have been taken which was expected. Have you ever tried getting one of those companies on the phone?
This has left us in a strange limbo. What should we do?
Until this is resolved, I don’t want to file her return without the 1099. That could lead to an identity theft case taking up to two years to resolve.
If this isn’t handled by April 15th, we’ll have no choice but to extend the return.
This will happen more and more as the gig economy grows. If you are an employer where this could potentially be an issue, I’d suggest tightening your HR Practices.
Ensure you receive proper identification for new hires and that you are dealing with a real person. Without that, you could end up in this situation.
As always, if you’re having difficulties with your accounting and tax work, please contact us today. We’d love to help.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
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