IRS issues guidance for taxpayers caught up in unemployment overpayment debacle

Taxes

HARTFORD, Conn. (WTNH) — A number of people who watched our report on unemployment overpayments Friday have reached out looking for answers.

Connecticut is not the only state dealing with overpayment issues. The Internal Revenue Service is now issuing guidance.

Sherri Fiordelisi, a Branford resident, filed for unemployment last March along with 135 other co-workers at GHP in West Haven. She says, “We didn’t know what was gonna happen.”

But after her company, which is a printing house for medical companies and banks, was deemed essential the company president said ‘cancel the unemployment’.

“I got called into the president’s office he says ‘you are essential, come off unemployment.'”

Fiordelisi canceled her claim the same day.

“I went on and off unemployment literally in four hours.”

But in May, nearly two months later she received five direct deposits for unemployment from the Connecticut Department of Labor (CT DOL) totaling $5,645.

She returned the money. Just like Kathleen Henderson of Milford.

Henderson said, “I did the right thing, why should I be in this position now?”

Both received confirmation from the state that their overpaid unemployment was returned and paid in full. They were also charged a four-dollar processing fee.

But as News 8 first reported, residents are still getting tax forms from the state showing the amount repaid is zero. And they owe taxes which on average can run $1,000.

Fiordelisi: “I can’t believe the state didn’t have a better handle on this.”

Dennis Cole, a certified public accountant and former president of the Connecticut Society of CPAs, doesn’t have direct knowledge of what happened within the walls of CT DOL but suspects a technology glitch.

“The cash going out is an outflow and when being paid back the two databases may not be talking to one another and that’s probably what happened in this case,” said Cole.

But he says, the state’s resolution that people pay the tax this year and get a credit next year – as outlined in an email obtained by News 8 – is not what he would advise.

“I would recommend putting in the gross amount and netting out the amount that was actually received. These people are having a tough enough time paying bills you can’t ask them to front this money,” added Cole.

The state reports more than 1.3 million unemployment applications were filed. 600,000 1099G tax forms were issued with a potential for 130,000 overpayments.

Juliet Manalan, a CT DOL spokesperson, tells News 8, “The department makes every attempt to credit overpayments quickly, however, the pandemic volume has caused some delays.”

“It’s their mistake and you’re telling me ‘oh well sorry tough luck.’ Doesn’t work,” said Fiordelisi.

The CT Society of CPA’s is expected to send out guidance on the issue to their members.

Meantime, taxpayers who receive an incorrect Form 1099-G should contact the issuing state agency to request a revised form. If they’re unable to get a timely, corrected form from the state, they should still file an accurate tax return, reporting only the income they received.

IRS guidance is they should save whatever documentation they have regarding their attempts to receive a corrected form from their state agency.

Cole, a managing partner from Beers, Hamerman, Cohen & Burger, PC says electronic filers can expect to get a follow-up from the IRS in a few weeks. Those who file paperwork through the mail could be waiting for months because of a pandemic backlog.

For more info from the CT DOL where customers can set up a call back to receive help: https://portal.ct.gov/DOLUI

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