What Is Tax Form 1099-G?

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Tax Form 1099-G is a form sent by a local, state or federal government to report certain governmental payments. Form 1099-G is most commonly sent to report state income tax refunds and unemployment benefits paid. If you didn't deduct your state income tax last year, you don't need to report the tax refund section of the form. Otherwise, everything should be reported on your main tax Form 1040.

Tax Refunds

If you received a state or local tax refund last year, your state or local government will issue you a 1099-G and report the refund amount in Box 2. You need to report the refund if you deducted your state taxes last year. The IRS allows you to deduct state taxes paid against your federal taxable income, so if you over-withheld state taxes, you may have deducted too much. If you listed the entire amount as a deduction and received a state refund, you need to report Box 2 on this year's return to correct the excess deduction.

For example, say that you had $4,000 withheld from your wages last year, listed $4,000 as state taxes paid and subsequently received a state tax refund of $500. Since you received a refund, you actually only paid $3,500 in state taxes instead of $4,000. In this situation, you need to report the $500 listed in Box 2 on this year's return to correct the mistake.

Unemployment Income

Although unemployment benefits aren't subject to payroll taxes, they are considered taxable income. If you received more than $10 in unemployment compensation during the year, your state will send you a Form 1099-G. Reportable unemployment compensation will be listed in Box 1. If you elected to have federal income tax withheld from your unemployment benefits, that amount will be listed in Box 4.

Other Income

If any other income is listed on Form 1099-G, you need to report it. If you received payments under the Reemployment Trade Adjustment Assistance program, they will be listed in Box 5. Taxable grant proceeds are reported in Box 6, certain agricultural subsidy payments are listed in Box 7, and market gains from repaying Community Credit Corporation agricultural loans are listed in Box 9.