Government Agencies issue Tax Form 1099-G to inform taxpayers of the funds they received during the tax year. The taxpayer should report it on their federal income tax returns.
What is Form 1099-G, and what information does it report?
The most common use of Form 1099-G is that it is used to report unemployment compensation and the income tax refunds that the taxpayer has received in the year. If a person receives Form 1099-G from a government agency, they should report the information it contains on their tax return.
Form 1099-G Instructions
Box 1 of this Form shows total unemployment compensation payments for the year. This information needs to be reported as taxable income on Form 1040. Box 2 of the Form 1099-G states local and state income tax refunds and credits. The amount must be reported if the taxpayer took a federal deduction for paying those taxes and that the tax deduction reduced the federal taxes.
Form 1099-G also comprises other boxes that show the amount that the taxpayer received from other Government agencies, including payments from the Department of Agriculture, taxable grants, etc.
Form 1099-G to report unemployment compensation
If you are getting unemployment compensation from the state government, those benefits are subject to federal taxes. The taxpayer’s benefits will be shown on Box 1 of Form 1099-G. If you choose to have taxes withheld from the benefits, the amount will appear on Box 4 of the Form. While preparing the returns, the taxpayer will report in Box 1 of the Form as part of the income in Form 1040.
Form 1099-G for reporting state tax refunds and credits
If the state offers a refund or credit offset on the state or local income, this amount will be reported in Box 2 of Form 1099-G. A common reason for receiving a refund is that the taxpayer has overpaid the taxes. This payment may or may not be taxable; if the taxpayer claims a deduction on the tax return of the previous year, then this amount is not taxable. On the other hand, if the taxpayer has claimed itemized deductions, then all or part of the refund is taxable.
Other payments covered by Form 1099-G
Apart from income tax returns and unemployment compensation, other payments are also covered by Form 1099-G. This payment includes,
- RTAA (Reemployment Trade Adjustment Assistance) payments. This is reported in Box 5.
- Taxable grants that are received from the state, federal and local government. This is reported in Box 6.
- Payments from the Department of Agriculture that is taxable. This payment will be reported in Box 7 of the tax Form.
- Market gains on commodity credit corporation loans. This payment will be reported in Box 9 of the Form.
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