Fraud happens when you purposely give wrong information or do not share information to get benefits. Some common ways this can happen with unemployment benefits include:

• Not reporting your earnings when you start a full-time, part-time, or temporary job.
• Not looking for a job while you are getting benefits.
• Not keeping a record of your work search.
• Giving incorrect information when you file your claim or weekly certification.
• Not reporting money you earned for the week that you worked.
• Not reporting money you got for training.
• Not reporting severance or bonus pay.
• Helping others get benefits they are not eligible for.
• Committing identity theft.

The N.C. Division of Employment Security (DES) does a review, also called an audit, of unemployment claims using:

• Information from the North Carolina New Hire Directory (NCNH) and the National Directory of New Hires (NDNH).
• Wage information from employers.
• Tips and leads from others.

If an audit shows that you may have gotten benefits that you should not have, an investigator will reach out to you for more information. You may also receive a Potential Overpayment Notice.

Fraud overpayments can lead to serious consequences, like not being able to get unemployment benefits for one year and penalties being added to your overpayment. DES may collect money to recover your overpayment by:

• Withholding part of your earnings.
• Withholding your federal tax refund.
• Withholding your state tax refund.
• Withholding your lottery winnings.
• Beginning criminal prosecution and/or civil court action.

If you have an overpayment balance while you are getting benefits, DES will cut your benefits by:

• 50% for non-fraud overpayments; or
• 100% for fraud overpayments.

These reductions will go toward paying off your overpayment balance.

If you commit fraud, you could face:  

• A 15% penalty on the amount you owe.
• A one-year ban from getting unemployment benefits.
• A fine, criminal charges, and up to 12 months in prison.

The most common types of unemployment insurance fraud employers commit include:

• Helping someone to file a false benefits claim.
• Manipulating the State Unemployment Tax Act (SUTA) to get a lower tax rate.
• Misclassifying workers as independent contractors to avoid paying UI taxes.
• Failing to report, or incorrectly reporting, employee wages.
• Paying employees secretly, or off-the-books or under-the-table.
• Moving workers between payrolls to use a lower UI tax rate.
• Failing to report new employees.
• Reporting the wrong start dates for employees.
• Giving false information to stop a person from getting unemployment benefits.
• Failing to pay UI taxes.
• Failing to file reports.
• Keeping DES from checking business records.

Employers who commit unemployment insurance tax fraud may have to:

• Pay a 50% penalty on the tax amount owed.
• Face a monthly penalty of 5% for each month they did not file, up to 25% of the total owed.
• Be charged with a Class 1 misdemeanor, face a fine and serve up to 120 days in jail for each violation.

Anyone who helps an employer avoid payment can:

• Be charged with a Class H felony.
• Be fined.
• Serve up to 36-42 months in prison.

If an agent helps an employer avoid tax payments, they can:

• Be prosecuted for a felony.
• Be charged a fine.
• Serve 20 to 231 months in prison.