In a Nutshell
The “G” in 1099-G stands for “government.” Your state or local government sends this form to report certain kinds of government payments, which may be taxable income to you. Here are some situations where you might get a 1099-G and what you should do with it.This article was fact-checked by our editors and Troy Grimes, tax product specialist with Credit Karma. It has been updated for the 2019 tax year.
As Tax Day approaches, tax forms start arriving in the mail and you could receive some that you don’t understand — like a 1099-G.
If you received a refund of any state or local income taxes on last year’s return, or received unemployment benefits, you could find yourself the proud owner of a Form 1099-G, Certain Government Payments. Here are some things to know about the 1099-G and what you need to do if you get one this year.
What is Form 1099-G?
Generally, federal, state and local governments issue a Form 1099-G when they pay someone any of the following:
- Unemployment compensation
- State or local income tax refunds, credits or offsets
- Re-employment trade adjustment assistance payments
- Taxable grants
- Agricultural payments
Unemployment benefits and state and local income tax refunds are the most common reasons you should receive a 1099-G, so we’ll focus on these payments in this article.
Unemployment compensation
If you received unemployment benefits of $10 or more during the tax year, the government agency that paid those benefits should issue you a 1099-G. The form should show the amount of the benefits you received.
Unemployment compensation is generally taxable income to you, so Form 1099-G gives you the amount of unemployment benefits you must report on your tax return. You may opt to have federal income tax withheld on those benefits. If you do, the amount withheld will be reported in Box 4.
State or local income tax refunds
If you received a refund of state or local income taxes of $10 or more on a prior year’s return, the state or local taxing authority should send you a 1099-G form showing the refund amount in Box 2. If the amount is for a tax year other the prior year, the appropriate tax year will be is reported in Box 3.
Your state or local income tax refund is only taxable income if you claimed an itemized deduction for those taxes on your federal income tax return for the year being reported on. If you claimed the standard deduction for that year, the refund is not taxable income.
For example, say in March of 2019 you filed your 2018 tax return. On your federal return, you itemized deductions, claiming state income taxes withheld of $500. After filing your return, you received a refund on your state income tax return of $50. As your 2019 tax documents start arriving in January 2020, you should receive a 1099-G from your state showing a refund of $50 from 2018. This amount will be taxable income on your 2019 return.
However, if you claimed the standard deduction on your 2018 return, that $50 refund would not be taxable income.
Multiple 1099-Gs
It’s possible that you could receive more than one Form 1099-G in the same year. This would happen if you received unemployment benefits and a state or local tax refund in the same year.
It could also happen if you file a return in more than one state and receive refunds in each state, or if you file amended returns for several prior returns, generating refunds from multiple years.
What do I do with my 1099-G?
If you receive a 1099-G, you should use the information on the form to complete your tax return. Typically, your tax software will calculate the taxable portion of your state income tax refund as long as information from your prior year’s return is entered.
Don’t ignore the 1099-G or forget to include it in your tax preparation. Failing to report taxable income could mean you end up owing more federal income tax, as well as penalties and interest on the tax you didn’t pay.
Once you file your return, just keep the 1099-G form with your tax records. You don’t need to send a copy of the form to the IRS or your state taxing authority.
What’s next?
At tax time, all the tax forms you receive might look confusing. But once you know what they’re for, and where to find the information you need to complete your return, most 1099 forms are actually pretty simple. Just enter the information from the form when prompted by your tax-preparation software and let technology do the rest.
If you’re owed one, you should receive your 1099-G by January 31, giving you plenty of time to complete your taxes by Tax Day (typically April 15). If you don’t receive your forms in time, call your state or local taxing authority or unemployment office. The IRS gets copies of all 1099s, so they’ll be expecting you to include that income on your return when necessary.
Relevant sources: IRS: About Form 1099-G, Certain Government Payments | Form 1099-G | Instructions for Form 1099-G | Bureau of Labor Statistics, Employment Situation Summary | IRS: Unemployment Compensation | IRS FAQs: 1099 Information Returns | IRS General Instructions for Certain Information Returns
Troy Grimes is a tax product specialist with Credit Karma. He’s worked in tax, accounting and educational software development for nearly 30 years. He has a bachelor’s degree in business administration with an emphasis in business analysis from Texas A&M University. You can find him on LinkedIn.