A: Anecdotally, this is because taxi driving has been an under the table, all cash business for decades. And since cab drivers are classified as independent contractors, there are no employee W-2 forms issued by the cab company.
Q: "Hi everyone, My question is : how is it possible to collect unemployment and work as a taxi driver? i talked to some drivers in NY and they said too many drivers doing that!"
And since cab companies are considered vehicle leasing services to drivers, (in other words, they're in the "taxi related" business of renting taxicabs to drivers, not taxi service itself to the public), they do not issue 1099 forms to cab drivers for services paid for and rendered to the cab company by the cab driver.
So there's no paper trail either by W-2 or 1099. This is most likely how taxi drivers have been able to collect unemployment or other government benefits, since there was no evidence of any income.
This may or may not begin to change come 2012 because of a new IRS rule. In 2012, cab companies under the new law will have to issue 1099K forms to all their cab drivers documenting all fares paid by credit and debit cards. This will for the first time in over thirty years verify at least part of a taxi drivers income, and may make it harder for cab drivers who are simultaneously collecting unemployment.