By Sarah Chaney Cambon 

Waves of attempted fraud during the pandemic have plagued state unemployment benefits programs. We answer questions on what unemployment fraud is, how it is affecting the national jobless claims report and what states are doing to combat it.

What is unemployment fraud?

There are different types of unemployment insurance fraud, including when someone knowingly continues to collect unemployment benefits after returning to work.

During the pandemic, states have grappled with a rise in unemployment insurance fraud tied to identity theft. In this form of fraud, criminals steal victims' identities and then apply for unemployment benefits.

Victims of identity theft often discover they have been targeted when they try to file for jobless benefits, receive notification from the state unemployment office, receive an Internal Revenue Service form noting the payments or get a notification from their employer, a Federal Bureau of Investigation notice said.

Is unemployment fraud distorting the weekly jobless claims data?

Unemployment fraud doesn't appear to be distorting the long-term trend in jobless claims. Filings climbed last spring when the pandemic first hit and fell over the summer during business reopenings. They stagnated over much of the winter and improved in recent weeks.

However, fraud does at times throw off the weekly movements in unemployment claims. A Government Accountability Office report released late last year said the weekly data both over- and underestimated the actual claims counts at various times. That is because states might report the fraudulent claims one week and then correct them the next.

For instance, claims fell significantly in Ohio last week after a large increase earlier in the month that state officials said was likely attempted fraud.

How widespread is the fraud?

States across the country -- including California, Louisiana, Illinois, Maryland and others -- have collectively received millions of unemployment insurance requests that officials believe to be tied to fraud, with losses likely in the billions of dollars.

How is the fraud affecting workers?

Some states have frozen the accounts of legitimate filers as they address the fraud. Many workers say they have faced financial stress during payment delays.

Tax season is creating new headaches. Some workers are receiving 1099 tax forms saying they claimed unemployment benefits when they actually didn't.

How are states addressing the fraud?

State unemployment insurance programs have received funds from the federal government. They have used this money to hire staff to investigate potential fraudulent claims and to implement software to help weed out fraud, a U.S. Labor Department report said.

The U.S. Labor Department announced in February the award of $49 million in grants to assist some states as they combat fraud.

Write to Sarah Chaney Cambon at sarah.chaney@wsj.com

(END) Dow Jones Newswires

February 25, 2021 15:29 ET (20:29 GMT)