California unemployment: Workers with jobs get EDD benefits, desperately try to return it before year's end

ByMichael Finney and Renee Koury KGO logo
Thursday, November 19, 2020
EDD sends unasked-for payments as workers try to return money
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While others wait for funds, some workers were overpaid by the EDD. Now, as the year comes to a close, it's a race to return the money before penalties and tax implications hit them.

HAYWARD, Calif. (KGO) -- While thousands of unemployed workers struggle to get their EDD benefits, another group has the opposite problem. They received benefits even though they have jobs. That might seem like free money, but it's actually a huge problem.

EDD paid thousands of workers automatically when the pandemic hit. But many had returned to work. They've been trying to give the money back or face penalties and taxes -- but no response from EDD.

7 On Your Side introduced you to Les Wylie of Hayward earlier this year. He and his wife Catherine have been trying since last march to return money the EDD gave him by mistake.

"I been trying to tell them I didn't need the money, I don't want the money, I want to give it back," Wylie said. "And they won't contact me to tell me who, what, where to send the money to."

Les is a candymaker at Annabelle's in Hayward. The factory shut down when the pandemic hit and Wylie applied for unemployment.

VIDEO: Bay Area mom unable to feed kids after EDD freezes legitimate account

The California EDD and banking partner Bank of America have been freezing unemployment accounts suspected of fraud. One Bay Area woman had $9,000 in her account, but was locked out. With no money, she sent her three children to live with their aunt.

But three days later, the factory reopened, Wylie went back to work, and he stopped claiming unemployment.

But EDD didn't stop paying him.

"Called the number on the back of the bank card to see what the balance was: $6,200 dollars," Wylie said.

Wylie tried contacting EDD, even sent a certified letter pleading: "Help me stop these payments and return the money..."

No response.

RELATED: As many as 1 in every 3 EDD claims is fraudulent, security firm says

The same thing happened to Cindy Carter in Dublin - she returned to work only to find money still pouring into her EDD account. EDD couldn't tell her how to fix it.

"I have a card with four to $6,000 on it that's not mine," she said. "I don't trust sending them a check right now to pay them off... because they're not getting my letters, they're not getting my emails."

She worries the EDD will eventually charge interest and penalties on benefits she didn't ask for.

And, as the end of the year draws near, another pitfall.

"They could automatically tax us for it and we can't spend it, so we're putting out more money to the government," points out Catherine Wylie.

"There are severe ramifications for not addressing it." IRS Enrolled Agent Norman Golden said. He adds that the payments, though erroneous, will nevertheless be reported as income to the IRS, on form 1099-G. So,workers will have to report the unwanted earnings too, or the inconsistency will raise a red flag with the IRS.

"It doesn't do any good to sit there and say, 'This is wrong, I shouldn't have gotten money, I'm trying to get it back, I just can't find a way to get it back'" Golden said. "The IRS computers won't hear that.".

Golden says workers should report the income but also can use the form to "back out" the income from their total earning. Taxpayers can then attach a statement explaining why that money is being deducted from earnings, using theForm 8275 disclosure statement.

"If you used the money it's not a good thing,'' Golden said. If not, the disclosure statement can point out that the taxpayer has not spent the money and is waiting for a way to return it. Deducting the amount will reduce the tax liability. However, it's possible the IRS won't accept the explanation, and assess fees and penalties on the unpaid tax amount, Golden said.

VIDEO: Why is Bank of America draining EDD bank accounts?

Bank of America has been draining money out of countless EDD accounts, leaving many Californians bewildered and broke.

Now the EDD says workers can submit a form to certify for those benefits. If it shows they were overpaid, EDD will provide a way to return the funds.

But workers have only until November 21, 2020 to file the form.

"We're really afraid of them coming back at us for something we didn't do. I don't wanna be accused of fraud because of their mistake," Les Wylie said.

"I wish they'd just deduct the money off my card so I can get on with my life,'' Cater said.

EDD gave automatic benefits up until May 9, 2020. If you were overpaid during that time, you can use the form to give money back.

Here's EDD's "Retroactive Certification for Unemployment" form for returning overpayments

Take a look at more stories and videos by Michael Finney and 7 On Your Side.

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