Vt. data breach damage control to cost upwards of $7M - WCAX

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MONTPELIER, Vt. (WCAX) - State leaders for the fifth day in a row continued to grapple with the scope of a technical error at the Vermont Department of Labor that compromised the identities of thousands of Vermonters.

The snafu, first announced Monday, involves upward of 44,000 1099-G tax forms issued by the Vermont Department of Labor that mixed up personal information of claimants. ”We certainly apologize to all of those impacted. This shouldn’t have happened. We are going to work to make this right,” Gov. Phil Scott said Friday.

Three state government teams are now digging into the situation - to protect the unemployment claimants from identity-theft, to make sure it doesn’t happen again, and to get the correct Labor Department 1099-G forms out.

“The ones that were issued by the Department of Labor have been identified as incorrect and they’re going through a process to issue correct ones,” said Vt. Tax Commissioner Craig Bolio.

Tax Department 1099-G’s

Commissioner Bolio says that the defective 1099-G′s issued by the Department of Labor are different than those issued by the Department of Taxes. Those issued by the Tax Department should be kept for tax filing later this year, as they are correct and do not contain errors. Commissioner Bolio says Vermonters will receive a 1099-G from the Department of Taxes if you received a Vermont Income Tax refund last year and itemized deductions at the federal level or if your business received an Economic Recovery Grant or other taxable grant from the Department last year. The Tax Department’s 1099-Gs will have information either in Box 2 “State or local income tax refunds,” or Box 6 “Taxable grants.” It also will not include information in Box 1: ‘Unemployment compensation’

Labor Department 1099-G’s

However, if you received a 1099-G from the Department of Labor, you will have to wait for an envelope from the state to return your document, even if the information on it is correct. If the 1099-G from the Labor Department has the DOL’s return address on the original envelope or on the 1099-G form itself, or if the document contains information in Box 1 “Unemployment Compensation,” the document will have to be returned. The state is sending out the pre-paid envelopes by the middle of next week to reclaim the defective 1099-G documents from the Department of Labor. Below is a copy of a 1099-G from the Department of Taxes that does NOT need to be returned.

Officials are also scrambling to protect the identities of those whose information could have been compromised. The state will pay up to $7 million for identity theft protection. They’re still deciding on who will provide those services.

Lawmakers say they’re ready to help mitigate the damage. “They should know almost immediately that the Legislature is going to step up, they are going to fix this problem, and we are going to pay for services that help prevent any further distribution of these numbers or hurt peoples’ credit ratings or their loan possibilities,” said Sen. Michael Sirotkin, D-Chittenden County.

Meanwhile, the state auditor’s office is contracting with an outside firm to determine what went wrong.

Although Governor Scott installed a new deputy commissioner at the labor department this week, he says Commissioner Mike Harrington is still in charge and that he has confidence in his ability to lead the department.