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New York State
Department of Labor

Andrew M. Cuomo, Governor Peter M. Rivera, Commissioner

VIDEO: Labor Department to Recoup Up To $140 Million in Fraudulent Unemployment Claims by Garnishing Federal Income Tax Returns

Notices Sent to More Than 80,000 Claimants after Repeated Warnings

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Albany, NY (September 30, 2010) -

State Labor Commissioner Colleen C. Gardner today announced that people who owe the unemployment insurance system money due to fraud might lose all or part of their federal income tax refunds in order to repay their debt. Today, acting under a new federal authority, the Department of Labor sent notices to 80,590 people who collectively owe the system $140.7 million due to alleged unemployment insurance fraud. The notices give them 60 days to make payment or prove that they do not owe the money or else their debts will be referred to the U.S. Department of the Treasury for collection.

"More than 80,000 New Yorkers who illegally collected UI ignored our repeated warnings to pay back this money," said Commissioner Gardner.  "This is their final warning.  This new authority gives New York State a powerful method to recover monies that were obtained fraudulently and return them to the Unemployment Insurance Trust Fund, where they can rightfully serve struggling New Yorkers who are unemployed through no fault of their own."

Federal legislation passed in 2008 directed the U.S. Department of the Treasury to assist the U.S. Department of Labor (USDOL) and the states to recover unemployment benefits, improperly paid due to fraud, from federal income tax returns. USDOL recently issued the required guidance to states. This will be the first year that any state is recouping fraudulently collected benefits from federal tax refunds under the new Treasury Offset Program.

This is an additional step in the many actions that the Department of Labor is taking to prevent, detect and recoup fraudulently collected benefits. Previously, fraudulent overpayments were collected through general collection techniques, the filing of a judgment by the Attorney General's Office, garnishing of state income tax refunds, or by forfeiture of future unemployment insurance benefits.

"Returning money to the Trust Fund also benefits employers by reducing the amount of federal borrowing needed to reduce the Trust Fund's deficit," noted Commissioner Gardner. 

Today's notice comes after repeated attempts to collect the debts. Notices and statements were mailed year after year to claimants who owe the Unemployment Insurance program for benefits fraudulently collected.  Some of the debts are 10 years old. 

The debt is legally enforceable and due to fraud, and claimants have 60 days from today to make payment or submit evidence that proves they do not owe the money. Such evidence might include proof that: 

  • The debt was cleared in bankruptcy court.
  • The debt is already paid.
  • The Social Security Number (SSN) on file is not their SSN, so they are not the debtor.

If the amount received within the 60-day timeline does not satisfy the debt, or the claimant does not respond with sufficient evidence disputing the debt, it will be referred to the Treasury Department to begin the federal tax garnishing process. 

The amount received will go directly to the NYS Unemployment Insurance Trust Fund, which currently has a deficit of $3.1 billion.

Those who have questions about their outstanding debt should contact the Department's Benefit Overpayment Section at 1-800-533-6600.

The Department sent notices to the following numbers of people, by geographic region:

REGION

# of PEOPLE
SENT NOTICES

TOTAL DEBT OWED

CAPITAL/NORTHERN

5,056

$7,843,042

CENTRAL/MOHAWK

5,035

$8,305,349

FINGER LAKES

5,284

$8,810,673

HUDSON VALLEY

5,957

$10,726,822

LONG ISLAND

7,430

$13,169,248

NEW YORK CITY

29,798

$54,083,295

SOUTHERN TIER

2,032

$2,890,626

WESTERN NY

7,232

$11,964,619

OTHER NYS REGION

118

$181,646

OUTSIDE NYS

12,648

$22,789,395

TOTAL

80,590

$140,764,715

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