What Is Form 1099-G?
Federal, state and local governments may issue taxpayers Form 1099-G for certain types of government payments. While there are a handful of purposes for this form, it’s most commonly used for two payment types:
- unemployment compensation
- state or local income tax refunds, credits or offsets.
Regardless of the type of payment, you may need to include some of the information from this form on your return. Additionally, the payment may or may not be taxable to you depending on the specific situation.
1099-G Form for Unemployment Compensation
If you are drawing unemployment income from the state government, those unemployment benefits are subject to taxes. The amount of your benefits will be shown in Box 1 on your 1099-G. If you’ve chosen to have taxes withheld from your benefits, that amount will appear in Box 4.
If you have a tax return filing requirement, when it’s time to prepare your return, you’ll include the amount from Box 1 as part of your income on your 1040.
Have questions about unemployment and taxes? Be sure to visit our Unemployment Tax Resource Center for help with unemployment related topics and find out how to file your Form 1099-G for free.
1099-G Form for State Tax Refunds, Credits or Offsets
If the state issues you a refund, credit or offset of state or local income, that amount will be shown in Box 2 of your 1099-G form. The most common reason for receiving a refund is because of an overpayment of state taxes, as explained in the example below. This payment may or may not be taxable to you. If you claimed the standard deduction on your previous year’s return, the amount is not taxable to you.
However, if you claimed itemized deductions on the previous year’s return, all or part of the refund is taxable in the year you receive the refund if you also deducted state and local income taxes, and received a tax benefit from deducting those taxes.
Let’s walk through Maria’s taxes as an example.
- In 2016, Maria had $3,000 withheld from her paycheck for state taxes. For that tax year she chose to claim itemized deductions and deducted the $3,000 state income from her federal income taxes.
- After completing her state tax return, she realized she actually only owed $2,500. In 2017, Maria’s state issued her a $500 refund on the amount of tax that was overpaid and sent her Form 1099-G to report the payment.
- However, because she received a 2016 tax benefit from deducting those taxes on her federal return, the 2017 state refund payment will be taxable to her for tax year 2017.
- To determine the taxable portion, she will refer to the Form 1040 Instructions, line 10.
Some states simply mail a postcard with instructions on how go online and download your 1099-G.
Other Payments Covered by Form 1099-G
The other reasons you may receive Form 1099-G include the following types of payments:
- Reemployment trade adjustment assistance (RTAA) payments. These are shown in Box 5.
- Taxable grants received from federal, state and local governments. These are shown in Box 6.
- Taxable payments from the Department of Agriculture. These are shown in Box 7.
- Market gains on Commodity Credit Corporation loans. These are shown in Box 9.
Additional Questions About Form 1099-G
If you have questions about the taxability of the payments made to you on Form 1099-G or simply have questions about your return, our Tax Pros are here to help. They know the ins and outs of taxes and can help you better understand your return.
Make an Appointment to speak with a Tax Pro today.
Learn more about form CP91, why you received it, and how to handle an IRS bill for unpaid tax with help from the tax experts at H&R Block.
Receive an IRS 672C letter? Learn more about Letter 672C and how to handle it with help from the tax experts at H&R Block.
Did you receive a 1099 form instead of an employee W-2? Let us help you understand the difference between these forms.
Learn more about the IRS underpayment tax penalty from the tax experts at H&R Block.