What Is Form 1099-G?
Form 1099-G, issued by the IRS, reports income from certain government payments, including:
- Unemployment compensation
- State or local income tax refunds, credits, or offsets
- Taxable grants
- Agricultural payments
Recipients use this form to file their taxes, as the income reported might be taxable depending on the circumstances. For instance, unemployment benefits are generally subject to federal income tax, while some state tax refunds might not be taxable if the taxpayer didn’t itemize deductions in the previous year.
2024 updates to Form 1099-G
In 2024, Announcement 2024-10 clarified that payments under specific programs, such as lead service line replacements, are not taxable. These programs aim to upgrade water infrastructure, and the associated payments are excluded from taxable income for property owners. Government entities and water systems are also exempt from filing Form 1099-G for these payments.
Filing instructions for Government entities
Federal, state, and local government agencies must file Form 1099-G if they make eligible payments. Key instructions include:
- Unemployment compensation (Box 1): Report total unemployment payments exceeding $10.
- State or Local tax refunds (Box 2): Report state or local income tax refunds, credits, or offsets of $10 or more.
- Federal income tax withheld (Box 4): Any federal income tax withheld from the reported payment must be documented here.
- RTAA payments (Box 5): Enter RTAA payments of $600 or more that you paid to eligible individuals under the Reemployment Trade Adjustment Assistance program.
- Taxable Grants (Box 6): Include grants related to energy conservation or other federally taxable grants.
- Agriculture Payments (Box 7): Record USDA agricultural subsidies or other agricultural assistance payments of $600 or more.
- Trade or business income (Box 8): Enter an “X” in this box If the amount in box 2 is a refund, credit, or offset attributable to an income tax that applies exclusively to income from a trade or business and is not a tax of general application.
- Market gain (Box 9): Report market gain associated with the repayment of a CCC loan whether repaid using cash or CCC certificates.
- State information (Box 10): These boxes may be used by filers who participate in the Combined Federal/State Filing Program and/or who are required to file paper copies of this form with a state tax department.
If federal taxes were withheld from any payments, the form must indicate this in Box 4, and backup withholding must comply with federal requirements.
How to fill out Form 1099-G
Taxpayers do not need to file Form 1099-G themselves; it is issued by the government entity making the payment. However, individuals must ensure the information is accurate and report it on their tax returns appropriately. For example:
- Unemployment benefits are included in taxable income on Form 1040.
- State tax refunds may or may not be taxable, depending on whether the taxpayer itemized deductions in the prior year.
If errors are identified, taxpayers should contact the issuing agency immediately to request a corrected form.
Where to apply for Government payments?
Applications for programs reported on Form 1099-G vary by type:
- Unemployment benefits: Apply through state unemployment offices.
- State tax refunds: Managed by state tax departments as part of the annual tax filing process.
- Agricultural payments: Available through the USDA’s Farm Service Agency.
- Grants: Specific instructions for applying to federal or state grants are usually detailed in the program’s guidelines.
For lead service line replacements, homeowners are advised to contact their local government or water utility company for details on eligibility and application.
Taxpayer responsibilities
When receiving Form 1099-G:
- Review for Accuracy: Verify all information matches your records.
- Report to the IRS: Include the appropriate amounts on your tax return to avoid penalties.
- Keep Records: Maintain copies of the form and any supporting documents for your records.
Taxpayers can access IRS resources for assistance or consult tax professionals for guidance on handling these forms.
