State snatching tax refunds from ‘unemployed’ chiselers

State Labor Department won't 'bear' unemployment benefit cheating. AP file photo

The Connecticut Labor Department said this week a new program aimed at recovering money from people who were cashing unemployment benefits checks while employed has intercepted $2.66 million in federal tax refunds.

Overall, the Department said it recovered $4.6 million in fraudulently cashed unemployment checks from 5,000 people in February.

“No one wants to see individuals or employers taking advantage of our unemployment system,” said State Labor Commissioner Sharon M. Palmer. “Nationally, Connecticut has one of the best performance records when it comes to minimizing the number of unemployment insurance overpayments, but we are making it a top priority to implement new tools and technology to improve upon our successes.”

According to Palmer, the funds, amounting to $4,622,902, were recovered through the Treasury Offset Program and a State Income Tax Intercept program that was upgraded in 2012.

Of the $4.6 million recovered in the past month, $2.66 million was the result of the new TOP initiative, a partnership with the Internal Revenue Service and the federal Labor Department. This program intercepts federal tax refunds when individuals have not responded to requests to repay unemployment insurance benefits that they were not entitled to collect.

For all of 2011, the state said it recovered $4 million in unemployment payments and expects to recover $8 million this year.

Unemployment benefits are paid for by employers. The money goes into a trust fund and right now Connecticut’s trust fund is deficient by about $670 million.

Nancy Steffens, a labor department spokeswoman, said the department is able to catch some people by cross referencing their names with IRS tax filings to find people who were basically double dipping. In some cases, people have made honest mistakes and filed for UI benefits after being hired but before receiving their first paycheck. She said in most of those cases, the people pay back their benefits immediately.

But Steffens said the department has found people collecting benefits and working under fake names and social security numbers. It’s also had cases where an employer hires his family members and lays them off so the family can collect the unemployment checks. And the department has seen employers create fake employees and lay them off, as well.

The number of cases have gone up in recent years as the number of people collecting has increased, Steffens said, but as a percentage remains fairly small.

During a conference on business development in Fairfield a few years ago, several restaurant owners reported having difficulty hiring people who would work on the books, meaning they would only take cash payments and didn’t wan their names to appear on any employment rosters. One such restaurateur said he was told by several applicants that they were collecting unemployment and didn’t want to lose the benefit.

Some people who have lost high paying jobs justify the continued collection of benefits because their new job doesn’t pay as much and the family would find it hard to cover its expenses.

Whatever the reasons, the state is going after cheats, so look out.“Our efforts are dedicated toward chasing cheaters because ultimately, this benefits the taxpayers of Connecticut and our overall economic health.”

Rob Varnon