Form 1099-G reports certain payments made to you by a federal, state, or local government agency. The two most common reasons you’ll receive one are unemployment compensation and state or local tax refunds, but the form also covers agricultural subsidies, taxable grants, and a few other government payments. If one shows up in your mailbox or online tax account, it means you need to account for that income when you file your federal return.
Types of Payments Reported on a 1099-G
Government agencies are required to send you a 1099-G if they paid you any of the following during the tax year:
- Unemployment compensation of $10 or more, including Railroad Retirement Board unemployment payments
- State or local income tax refunds, credits, or offsets of $10 or more
- Reemployment Trade Adjustment Assistance (RTAA) payments of $600 or more, which go to certain workers displaced by foreign trade competition
- Taxable grants, including energy-related grants from federal, state, or local programs and grants administered by Indian tribal governments (reported at any amount for energy grants, $600 or more for other taxable grants)
- Agricultural payments, such as USDA subsidies and market facilitation program payments
Each payment type has its own box on the form, so you can see exactly what category of income the government is reporting to the IRS on your behalf.
Unemployment Compensation
This is the most common reason people encounter a 1099-G. If you collected unemployment benefits at any point during the year, your state workforce agency will issue you a form showing the total amount paid. That full amount is generally taxable as ordinary income on your federal return. You report it on Schedule 1 of Form 1040, which feeds into your total income.
Some states let you have federal taxes withheld from your unemployment checks, similar to how an employer withholds from a paycheck. If you opted into withholding, the amount withheld will appear in Box 4 of your 1099-G, and you’ll get credit for it when you file, just like any other withholding.
State and Local Tax Refunds
Getting a 1099-G for a state tax refund doesn’t automatically mean you owe federal tax on that money. The key question is whether you itemized deductions on your federal return for the year you overpaid the state tax. If you took the standard deduction that year, the refund is not taxable, and you can ignore that part of the form entirely.
Here’s why: when you itemize, you deduct the state and local taxes you paid, which lowers your federal tax bill. If some of that money comes back to you as a refund, the IRS considers part of your earlier deduction to have been too large. You’re essentially “recovering” a deduction, so you may need to report some or all of the refund as income. The IRS provides a worksheet in Publication 525 to calculate exactly how much, if any, is taxable.
If you used the standard deduction, you never got a federal tax benefit from those state tax payments in the first place, so there’s nothing to recapture. Most taxpayers take the standard deduction, which means most people who receive a 1099-G for a state refund won’t owe anything extra.
Agricultural Payments and Grants
Farmers and ranchers who receive USDA subsidy payments, including market facilitation program payments, will see those amounts on a 1099-G. These are reported as farm income and typically go on Schedule F of your federal return.
Taxable grants from government programs also show up on the form. Energy-related grants, such as those for subsidized energy financing or conservation projects, are reported regardless of the dollar amount. Other taxable government grants trigger a 1099-G at the $600 threshold. Where you report grant income on your return depends on whether it’s connected to a business, a farm, or some other activity.
What to Do If You Get One You Don’t Recognize
During and after the pandemic, a wave of fraudulent unemployment claims led many people to receive 1099-G forms for benefits they never applied for or received. If this happens to you, the IRS is clear: do not report income you didn’t actually receive.
Start by reporting the fraud to the state agency that issued the form and request a corrected 1099-G. The Department of Labor maintains a list of state contacts for reporting unemployment fraud at DOL.gov/fraud. When you file your federal return, only include the income you actually received, even if you haven’t gotten the corrected form yet. The IRS says you should not delay filing while the investigation is pending.
You don’t need to file Form 14039, the IRS Identity Theft Affidavit, unless your e-filed return gets rejected because someone already filed using your Social Security number or the IRS specifically tells you to file one. The IRS does recommend that victims of unemployment identity theft enroll in the Identity Protection PIN program, which assigns you a unique six-digit number to use on future tax returns as an extra layer of security.
How to Use the Form When Filing
You’ll typically receive your 1099-G by late January for the prior tax year. Many states also make the form available through their online portals. When you sit down to file, here’s where each type of income goes:
- Unemployment compensation goes on Schedule 1, Line 7, which flows to your Form 1040.
- Taxable state or local refunds go on Schedule 1, Line 1, but only if you itemized the prior year (use the worksheet in Publication 525 to figure the taxable portion).
- Agricultural payments are generally reported on Schedule F.
- Taxable grants are reported on the schedule that matches the activity the grant relates to, such as Schedule C for business grants or Schedule F for farm grants.
If you use tax software, you’ll typically enter the amounts from each box of the 1099-G and the software will place them on the correct lines. Keep the form with your tax records. The IRS receives a copy of every 1099-G, so if the income on your return doesn’t match what was reported, you’re likely to hear from them.