Right, ESteele, that's what I was just about to tell this person. It was a pretty sorry thing to do. But....the small freelance jobs...did they actually take up all her time, preclude her looking for work during the time she was doing them? In other words, was she working night and day, and actually not able, available and actively seeking other work? What I'm saying is that it's possible that she, since she was not doing actual work for wages, was not doing anything that was illegal for her to do.
On unemployment weekly certifications, the question is not "Did you make any money this week?" The question is something like "Did you do any work for wages (for which you are paid or will be paid) this week?" If the work she did was sort of an independent contractor, free lance projects kind of thing, and it did not entail going to work for set hours and working enough during the time that she was doing it that she would not have been able to accept other work if it was offered to her, and she still continued to be able and available and making her searches for other work, it very well may not have been considered work that would have disqualified her for wages.
For example, farmers who make and tend a crop and sell it while they are drawing unemployment are not considered to be working for wages and are not disqualified by this side work. Yard sales, one time projects, helping out friends for favors or services, pick up tasks, these do not tend to be disqualifying. Opening a yard mowing business full time is disqualifying.
The right thing for her to have done would have been to ask, as soon as she picked up that first freelance thing, to ask the unemployment system whether or not she should report this project as wages, as her working, if it needed to be reported. Possibly it wouldn't have been, because as I say over and over, unemployment insurance is not based on the income you make, but whether or not you are working for wages for a covered employer and are no longer able and available for work.
But there's a fair chance, given the details of the projects and such, that her not reporting this income as work done for wages was okay and she didn't really commit fraud.
If she had been working for wages for a covered employer, she'd have been caught almost immediately. If her 1099 happens to cross match with the unemployment system, which happens eventually this would, as you said, be covered by the fact that she reported it all as having been earned in the quarter when she was no longer drawing benefits. Being as it has been this long, and that she may or may not have actually done something fraudulent in the first place, I think she is going to be actually home free on this.
Someone might, and this is one of the ways people frequently get caught, someone might decide to turn her in for reasons of spite, for example, if the two of you broke up, you might call the unemployment fraud unit and try to report it on her, or if a jealous friend knows what she did, the unemployment system might get a report on it.
If this were to happen, frankly, it's such a grey thing I doubt if there would be much that would happen. The tax preparer is being a bit crooked by telling you how to get around it for sure, but it was certainly your girlfriend's decision and fault that it happened, not his. As I have said, she may not have been doing anything illegal after all was said and done, but by not asking about it, by attempting to conceal it, she took a dangerous step and an unwise one.
As to the question of whether it would effect her future U.I. claims, that shows you have no understanding at all of how U.I. works. Because nobody in the world cares how much income you have had in previous years when they are certifying you for unemployment, it's how much you have made in the past 18 months for covered employers. They do not use your income tax returns to determine this, but their own employer tax records. If you don't have those wages in place, you don't have unemployment to draw, regardless how bad you need it, and if you do have those wages in place, it doesn't matter how much other income you have or have made, if you are a trust funder, or your wife works and makes $80 million a year, it's not based on your income in any way, just that you have had covered wages in the quarters they're using to set up the claim. No way her income tax for 2010 is going to be looked at for unemployment purposes ever unless they were exploring whether she committed that fraud.
