Employment Identity Theft: Clearing Your Record with Maine Revenue Services and the IRS

Employment identity theft occurs when an undocumented worker or a scammer uses your Social Security Number (SSN) to get a job, or when someone uses your personal information to fraudulently claim unemployment benefits. Because the wages or benefits are reported to the government under your SSN, the Internal Revenue Service (IRS) and the state of Maine will believe you earned that money. As a result, you will be hit with a massive, unexpected tax bill for income you never received.

Untangling yourself from employment fraud requires proving a negative-that you did not work at that specific company or file for those benefits. It involves coordinating with both federal tax authorities and state labor departments. If you receive a shocking tax notice or an unexpected W-2 form, reaching out to a local attorney or tax professional from our directory can save you from aggressive government collection actions.

Step-by-Step Process to Clear Your Record

Ignoring a tax notice is the worst thing you can do. The government will eventually garnish your wages or seize your bank accounts if you do not actively dispute the false income.

Step 1: Identifying the Tax Fraud

Most victims discover employment identity theft during tax season. You might try to e-file your tax return, only to have it rejected because the IRS says a return has already been filed under your SSN. Alternatively, you might receive a CP2000 Notice from the IRS, or a similar letter from Maine Revenue Services, Augusta, stating that you failed to report wages from a company you have never heard of. Do not panic, but do act immediately.

Step 2: Filing the IRS Identity Theft Affidavit

To stop the IRS from pursuing you for the scammer's taxes, you must formally alert them to the fraud. You will need to fill out Form 14039, FED, IRS, Identity Theft Affidavit. If the fraud involves a business entity you own, you would use Form 14039-B, FED, IRS, Business Identity Theft Affidavit. Attach a copy of your police report and your government-issued ID, and mail it to the specialized IRS address listed on the form. This puts a freeze on collection actions while they investigate.

Step 3: Reporting Unemployment Fraud to the State

During economic downturns, scammers frequently use stolen SSNs to claim unemployment benefits. If you receive a 1099-G form for unemployment benefits you never applied for, you are a victim of fraud. Under Maine law, the state aggressively pursues unemployment fraud. You must report this directly to the Maine Department of Labor, Augusta by submitting the Online Identity Theft Reporting Form, Maine, Department of Labor, Unemployment Fraud Reporting. The department's fraud unit, guided by 26 M.R.S. § 1051, will investigate the claim and remove the fraudulent benefits from your SSN record.

High-Risk Employment Sectors in Maine

Certain industries in Maine are particularly susceptible to employment identity theft due to high turnover and seasonal hiring.

Seasonal Forestry and Fishing Workers

Maine's massive logging and commercial fishing industries rely heavily on seasonal labor. Scammers often use stolen SSNs to secure these temporary jobs because employers in remote areas may not strictly verify identification documents through E-Verify. The scammer works for a few months, gets paid, and leaves you with the tax liability at the end of the year.

Gig Economy Contractors (1099 Fraud)

With the rise of delivery apps and ridesharing, gig economy fraud has skyrocketed. A scammer whose background check failed will buy a stolen SSN to drive for Uber or deliver for DoorDash. Because gig workers are independent contractors, the company issues a 1099-NEC at the end of the year. You are suddenly responsible for the self-employment taxes of a driver you have never met. To remove these fraudulent earnings, you must dispute the incorrect 1099-NEC with the IRS using Form 14039, FED, IRS, Identity Theft Affidavit, while federal law under 26 U.S.C. § 7434 provides civil remedies for damages caused by the fraudulent filing of information returns.

How Much Does it Cost in Maine?

Fixing employment identity theft is usually a matter of paperwork rather than litigation.

• Filing Forms: Submitting affidavits to the IRS, Maine Revenue Services, and the Department of Labor is completely free.
• Tax Professional Fees: If the IRS audits you or refuses to drop the tax liability, hiring a specialized tax attorney or CPA to represent you typically costs $150 to $350 per hour.
• Credit Freezes: Placing a security freeze on your credit reports with Equifax, Experian, and TransUnion is free by federal law.

How Long Does the Process Take?

Resolving tax-related identity theft is notoriously slow. Although the IRS maintains an internal target of 120 days, official reports from the National Taxpayer Advocate and the Treasury Inspector General for Tax Administration (TIGTA) show that the IRS Identity Theft Victim Assistance (IDTVA) unit takes approximately 580 to 655 days (about 19 to 20 months) on average to resolve a case and adjust an account due to inventory backlogs. In the meantime, you must continue paying any legitimate taxes you actually owe. The Maine Department of Labor generally resolves unemployment fraud claims faster, often within 30 to 60 days.

Frequently Asked Questions (FAQ)