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IRS Form 1099-G: Certain Government Payments
Understand IRS Form 1099-G, which reports unemployment compensation, state tax refunds, and other government payments. Learn when these payments are taxable.
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Understand IRS Form 1099-G, which reports unemployment compensation, state tax refunds, and other government payments. Learn when these payments are taxable.
This guide is designed for first-pass understanding. Start with core terms, then apply the framework in your own account workflow.
IRS Form 1099-G reports certain government payments you received during the tax year, primarily state and local tax refunds and unemployment compensation. If you collected unemployment benefits or received a refund from your state income taxes, a 1099-G is coming your way. The form became the subject of massive controversy during the COVID-19 pandemic, when unprecedented unemployment claims; and widespread identity fraud — generated millions of both legitimate and fraudulent 1099-G forms.
Form 1099-G has been part of the tax information reporting system for decades. The "G" stands for government; it covers payments made by federal, state, and local government agencies. The two most common types of payments reported are state or local income tax refunds (Box 2) and unemployment compensation (Box 1).
The form serves a straightforward purpose: the IRS needs to know when you receive money from the government that may be taxable. Unemployment compensation has been fully taxable since 1987, when Congress eliminated the partial exclusion that had previously existed. State tax refunds are taxable only in specific circumstances; generally when you itemized deductions in the prior year and received a tax benefit from deducting state income taxes.
Form 1099-G took on outsized importance during the COVID-19 pandemic. When the economy shut down in March 2020, unemployment claims skyrocketed to levels never seen before; nearly 23 million people were collecting unemployment benefits at the peak. This generated an enormous volume of 1099-G forms. At the same time, the expanded and supplemental unemployment benefits (including the additional $600 per week under the CARES Act) meant that many recipients had total unemployment income far higher than their normal wages.
Compounding the problem, criminal organizations exploited the overwhelmed unemployment systems to file millions of fraudulent claims using stolen identities. Victims of this fraud received 1099-G forms for unemployment benefits they never collected. The IRS and state agencies spent years sorting out these fraudulent claims, and many innocent taxpayers had to fight to correct their records.
Form 1099-G is filed by the government agency that made the payment. For unemployment compensation, this is typically your state's department of labor or employment security. For state tax refunds, it is your state's department of revenue or taxation. The form must be provided to recipients by January 31 of the following year.
Most states now provide 1099-G forms electronically through their unemployment or tax agency websites. If you collected unemployment benefits, check your state's online portal for your form before waiting for it in the mail.
You report unemployment compensation from Box 1 on Schedule 1, line 7 of your Form 1040. It flows through to your adjusted gross income and is taxed as ordinary income. State tax refunds from Box 2 may or may not be taxable; you use the worksheet in the instructions for Form 1040 to determine the taxable portion, which depends on whether you itemized deductions in the prior year.
No. Your state tax refund is only taxable if you itemized deductions on your federal return in the prior year and received a tax benefit from the state tax deduction. If you took the standard deduction, the refund is not taxable. If you itemized but were subject to the SALT cap ($10,000), only the portion of the refund that provided a tax benefit may be taxable.
This is a sign of identity theft. Contact your state unemployment agency immediately to report the fraud. Request a corrected 1099-G showing zero benefits. File an IRS Identity Theft Affidavit (Form 14039). Do not report the fraudulent income on your tax return — instead, include a statement explaining the situation.
Yes. Unemployment compensation has been fully taxable at the federal level since 1987. There was a temporary exclusion of up to $10,200 for tax year 2020 under the American Rescue Plan Act, but that exclusion has expired. Many states also tax unemployment benefits, though some provide partial or full exemptions.
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Box 1; Unemployment compensation. The total unemployment benefits paid to you during the year. This includes regular state unemployment, extended benefits, Pandemic Unemployment Assistance (PUA), Pandemic Emergency Unemployment Compensation (PEUC), and any Federal Pandemic Unemployment Compensation (FPUC) supplements. The full amount is generally taxable unless a specific exclusion applies.
Box 2; State or local income tax refunds, credits, or offsets. If you received a refund of state or local income taxes, it appears here. This amount is only taxable if you deducted state income taxes on your federal return in the prior year and received a tax benefit from that deduction. If you took the standard deduction in the prior year, your state refund is not taxable.
Box 4 — Federal income tax withheld. If you elected to have federal income tax withheld from your unemployment benefits, the withheld amount appears here. Many unemployment recipients do not opt for withholding and are surprised by a tax bill at filing time. The withholding rate for unemployment is a flat 10%, which is often insufficient for recipients who have other income sources.
Box 5 — RTAA payments. Reemployment Trade Adjustment Assistance payments, a relatively uncommon type of payment for trade-affected workers over age 50.
Box 6 — Taxable grants. Agricultural disaster payments, energy grants, and other taxable government grants. Less common but can appear for specific industries and disaster relief programs.
Not withholding taxes on unemployment benefits. When you first claim unemployment, most states give you the option to have 10% withheld for federal income tax. Many people skip this because their benefits are already lower than their normal pay. The result is a tax bill at filing time that catches them off guard. If you are receiving unemployment benefits, consider making estimated tax payments or opting into withholding.
Reporting a state tax refund as income when you took the standard deduction. Your state refund (Box 2) is only taxable if you itemized deductions on your prior year federal return and deducted state income taxes. If you took the standard deduction — as approximately 90% of filers now do — your state refund is not taxable. Many taxpayers report it as income unnecessarily, overpaying their federal tax.
Ignoring a fraudulent 1099-G. If you receive a 1099-G for unemployment benefits you never applied for or received, you are likely a victim of identity theft. Do not simply ignore the form. Report the fraud to your state's unemployment agency, file an identity theft affidavit (IRS Form 14039), and request a corrected 1099-G showing $0. If a corrected form is not available before you need to file, do not include the fraudulent income on your return and attach an explanation.
Forgetting about the state tax refund recovery rule. The taxability of your state refund depends on whether you received a "tax benefit" from the prior year's state tax deduction. If your itemized deductions only slightly exceeded the standard deduction, only a portion of your state refund may be taxable. The Form 1040 instructions include a worksheet for calculating this, but many people skip it and report the full amount.
The American Rescue Plan Act of 2021 provided a one-time exclusion of up to $10,200 per person of unemployment compensation received in tax year 2020. This exclusion applied to taxpayers with adjusted gross income below $150,000 and was designed to provide relief to the millions who lost jobs during the pandemic. The exclusion was only for the 2020 tax year and did not extend to subsequent years.
The IRS processed millions of amended returns and automatic adjustments related to this exclusion. Some taxpayers who filed before the American Rescue Plan was enacted had already paid tax on their full unemployment income and received refunds when the IRS applied the exclusion retroactively.
Also, the expanded standard deduction under the Tax Cuts and Jobs Act of 2017 means that far fewer taxpayers itemize their deductions compared to previous years. As a result, state tax refunds reported on 1099-G are less frequently taxable than they were before 2018, since you must have itemized in the prior year for the refund to be taxable.
Identity theft related to unemployment claims remains an ongoing concern. States have implemented stronger identity verification procedures, but taxpayers should continue to monitor their mailboxes and online accounts for unexpected 1099-G forms.
For more details, see the official IRS page for Form 1099-G.
This article is educational and does not constitute tax advice. Consult a qualified tax professional for guidance specific to your situation.
Should you itemize or take the standard deduction? Compare 2024, 2025, and 2026 amounts, learn the SALT cap impact, and use our step-by-step process to.