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Marsha411JD, Lawyer
Category: Criminal Law
Satisfied Customers: 20401
Experience:  Licensed attorney with 29 yrs. exp. in criminal law
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I have been collecting unemployment for the entire year of

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I collected unemployment for the entire year of 2009. During the year I worked as an independent contractor for a company off and on. It was hardly a steady paying gig. At first I started to claim my work with the California EDD, but I was interviewed shortly after by someone at EDD and told that it was "freelancing" and it did not count - it had to be full time employment. I immediately stopped claiming it to EDD at that point and continued working unreported. I now have learned that I misunderstood the conversation and I should have continued claiming the work I performed. I have already been issued a 1099-MISC filing my taxes for 2009 with the IRS and California State tax agency listing all of my income (1099-MISC for my independent contractor work and 1099G for the unemployment benefits). I am now very concerned that I am going to be in BIG trouble at some point and will have to pay severe penalties that I cannot afford. I worked a total amount of 97 hours throughout 2009 and earned roughly $7,350 being an independent contractor. For obvious reasons, I have no intention of alerting anyone to my mistake if it is most likely going to go unnoticed, but if I am caught I plan on being completely honest about the whole thing. What should I expect either way?
Submitted: 7 years ago.
Category: Criminal Law
Expert:  Marsha411JD replied 7 years ago.

If EDD discovers that you did not report income then they will demand immediate reimbursement of the amount of the overage of unemployment compensation you received due to the non-reporting of that income. In addition, if they conclude that your non-reporting was intentional then they can refer your case to State prosecutors to pursue fraud charges. If you are honest with them from the get go about being confused from your conversation and the fact that you actually asked, then they may not move forward with the fraud charges. They will, however, want the extra money they paid you back.
Customer: replied 7 years ago.
Thank you very much for your response, but I already understood that portion. I am more concerned with the amount that I would have to owe as well as the likelihood of the IRS and State Tax Agency reporting to EDD. Since I was on unemployment for the entire year and working periodically, would they demand the entire years worth of benefits as a blanket repayment or just the amount that I worked and did not claim? If I am cooperative would they negotiate a repayment program that would not put me in extreme financial burden? It was also my understanding that a 1099-MISC is a pretty broad form as in terms of earnings and that in does not necessarily send a red flag to the IRS/tax agencies in a situation like this. It was also my understanding that they do not always share this info with EDD. It is now a month since I filed. Would I have been informed by now? Thank you.
Expert:  Marsha411JD replied 7 years ago.
Hello again,

I'm sorry if I didn't make my response more clear or if I repeated some information you might, unbeknownst to me, have already known. Just to clarify, you will only be responsible for the amount your were overpaid, not the entire amount that you received for the year. And yes, the state unemployment offices do have access to both state and federal tax returns. California, probably in part due to their financial situation, is one of the states that do monitor the tax returns of their residents for under or overpayment of taxes or benefits. Any earnings listed income is a red flag for unemployment purposes so it won't matter that the income is reported on a 1099. They can follow up on any claimants where they believe their might be fraud. As for when you might hear from EDD, that could be at any time. They do have limited resources so I have heard of people a year or two down the line getting notice from EDD for reimbursement of overpayments. Finally, as to whether they would work something out with you. I don't personally know of any cases where they have accepted a payment plan or a partial payment, but they do have some flexibility in the negotiation for repayment. But since this is a bureaucratic institution there is no telling what they might do in a particular case.
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Customer: replied 7 years ago.
That clarifies it better. Thank you for your response.
Expert:  Marsha411JD replied 7 years ago.
You're welcome and best of luck to you.