Form 1099-G: Certain Government Payments (2014)

If you received unemployment benefits or a state tax refund in 2014, you likely received Form 1099-G in the mail. This form reports certain government payments to both you and the IRS, and understanding what to do with it is crucial for filing your taxes correctly. This guide breaks down everything you need to know about Form 1099-G for the 2014 tax year.

What Form 1099-G Is For

Form 1099-G, "Certain Government Payments," is an information return that federal, state, or local government agencies send to report specific types of payments they made to you during 2014. Think of it as the government's version of the W-2 form your employer sends—except this one tracks money you received from government programs rather than wages.

The most common payments reported on Form 1099-G include:

• Unemployment compensation (Box 1): This includes regular unemployment benefits, Railroad Retirement Board unemployment payments, and certain state programs like California's Family Temporary Disability Insurance payments
• State or local income tax refunds, credits, or offsets (Box 2): Money the state or local government returned to you because you overpaid your taxes in a previous year
• Federal income tax withheld (Box 4): Any taxes that were withheld from your unemployment payments at your request
• Reemployment Trade Adjustment Assistance (RTAA) payments (Box 5): Special assistance payments of $600 or more for workers affected by foreign trade
• Taxable grants (Box 6): Certain government grants for energy projects or other programs
• Agriculture payments (Box 7): USDA agricultural subsidy payments

The form serves two purposes: it informs you what government payments you received, and it tells the IRS what you should be reporting on your tax return. The IRS gets a copy of every Form 1099-G issued, so they'll be watching to make sure these amounts appear on your return IRS.gov.

When You’d Use Form 1099-G

Under normal circumstances, you should receive your Form 1099-G by February 2, 2015 (for the 2014 tax year), giving you plenty of time before the April 15 tax deadline. You use this form when preparing your original 2014 tax return.

Late/Amended Situations

However, life doesn't always go according to plan. Here are situations where Form 1099-G might come into play after you've already filed:

• Late-arriving forms: If you don't receive your Form 1099-G by mid-February, contact the government agency that should have sent it. Don't wait—you're still legally required to report the income even if you never receive the form. Check your state's unemployment website or revenue department portal, as many now offer online access to 1099-G information.
• Amended returns: You'll need to file an amended return (Form 1040X) if:
  • You discover you forgot to include unemployment compensation or a state refund from a Form 1099-G on your original return
  • You receive a corrected Form 1099-G (marked "CORRECTED") showing different amounts than what you originally reported
  • You realize you incorrectly calculated how much of a state tax refund should be included in your income
• Repayments made after filing: If you repaid unemployment benefits in 2014 that you had received and reported in an earlier year, and you didn't account for this on your original 2014 return, you may need to amend. If the repayment exceeds $3,000, special tax credit rules may apply that could save you money IRS.gov.

Keep all Forms 1099-G with your tax records for at least three years, as the IRS can request them during an audit.

Key Rules or Details for 2014

Several important rules governed Form 1099-G reporting for the 2014 tax year:

• Reporting threshold: Government agencies must file Form 1099-G if they paid you $10 or more in unemployment compensation or state/local tax refunds. For other payments like RTAA or taxable grants, the threshold is $600.
• Unemployment compensation is fully taxable: Every dollar of unemployment benefits you received in 2014 must be included in your gross income. There are no exceptions or exclusions. This has been the law since the Tax Reform Act of 1986. The full amount from Box 1 of your Form 1099-G goes on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ.
• State tax refunds follow the "recovery rule": This is where things get tricky. You only need to include a state tax refund in your 2014 income if you claimed it as a deduction in an earlier year AND received a tax benefit from that deduction. If you took the standard deduction instead of itemizing in the year you paid the state taxes, the refund is generally not taxable. The IRS provides a worksheet in the Form 1040 instructions to help you calculate the taxable portion.
• Timing matters for multi-year payments: If your refund relates to estimated tax payments you made across two calendar years (for example, three payments in 2013 and one payment in January 2014), you must allocate the refund proportionally. This prevents you from claiming a deduction in one year for taxes you didn't actually pay in that year.
• Voluntary withholding: For 2014, you could request that the government withhold federal income tax from your unemployment payments (usually at 10%). This withholding appears in Box 4 of your Form 1099-G and counts as a tax payment, just like withholding from wages.
• Same-year repayments: If you repaid unemployment compensation in 2014 that you also received in 2014, simply report the net amount (total received minus repayment) on your tax return. Write "Repaid" and the amount on the dotted line next to your entry IRS.gov.

Step-by-Step (High Level)

Step 1: Verify the information

When you receive Form 1099-G, check that your name, Social Security number, and address are correct. More importantly, verify the amounts match your records. Compare Box 1 against your unemployment payment records or Box 2 against your state refund letter. If there's an error, contact the issuing agency immediately to request a corrected form.

Step 2: Determine what's taxable

• For unemployment compensation (Box 1): The entire amount is taxable—no calculation needed.
• For state tax refunds (Box 2): Use the worksheet in the Form 1040 instructions for line 10 to determine how much, if any, is taxable. You'll need to know whether you itemized deductions in the tax year to which the refund applies and whether you received a tax benefit.
• For other payments (Boxes 5-7): These amounts are generally fully taxable but reported in different locations on your return.

Step 3: Report on the correct line

• Unemployment compensation: Form 1040 (line 19), Form 1040A (line 13), or Form 1040EZ (line 3)
• State/local tax refunds: Form 1040 only (line 10)—you cannot use Forms 1040A or 1040EZ if you have taxable state refunds
• RTAA payments: Form 1040, "Other income" line
• Agricultural payments: Schedule F or Schedule C, depending on your situation

Step 4: Account for withholding

If Box 4 shows federal income tax withheld, include this amount with your other tax withholding on Form 1040 (line 64), Form 1040A (line 40), or Form 1040EZ (line 7). This reduces your tax owed or increases your refund.

Step 5: Report any interest separately

If you received interest on a state tax refund, it may appear in the blank box on Form 1099-G, or you may receive a separate Form 1099-INT. Either way, report this interest as taxable interest income on line 8a of Form 1040.

Step 6: Keep documentation

File your Form 1099-G with your tax records. Don't attach it to your tax return unless specifically instructed. The IRS already has a copy IRS.gov.

Common Mistakes and How to Avoid Them

• Mistake #1: Not reporting unemployment at all
  Many people don't realize unemployment benefits are taxable. They see Form 1099-G arrive in the mail, shrug, and file their taxes without including it. Then they receive a nasty letter from the IRS months later demanding payment plus penalties. Fix: Remember that if you received it, you must report it. No exceptions. The IRS computers automatically match Form 1099-G data to tax returns.
• Mistake #2: Including non-taxable state refunds
  On the flip side, some taxpayers dutifully include their entire state refund from Box 2 without checking whether it's actually taxable. If you took the standard deduction in 2013, your 2013 state tax refund received in 2014 is probably not taxable. Fix: Always complete the state tax refund worksheet before including any amount on line 10. Don't just blindly copy the Box 2 amount.
• Mistake #3: Forgetting about multi-year allocation
  Say you paid $4,000 in state estimated taxes for 2013—$3,000 in 2013 and $1,000 in January 2014. Later you get a $400 refund. Some of that refund relates to the 2013 payment (which you deducted on your 2013 return) and some to the 2014 payment (which you'll deduct on your 2014 return). You need to allocate proportionally: 75% of the refund ($300) is taxable recovery; 25% ($100) is not. Fix: Use the allocation formula in Publication 525. When in doubt, consult a tax professional for complex multi-year situations.
• Mistake #4: Mishandling repayments
  If you repaid unemployment in 2014, the timing of the original payment matters. Same-year repayments (repaying 2014 benefits in 2014) are handled differently from prior-year repayments (repaying 2013 benefits in 2014). Fix: For same-year: report the net amount. For prior-year: itemize the repayment on Schedule A, line 23, or claim a tax credit if the repayment exceeds $3,000.
• Mistake #5: Ignoring Box 4 withholding
  The federal income tax withheld in Box 4 is easy to overlook, especially if you're focused on the payment amounts. But this is money you've already paid toward your tax bill. Fix: Add Box 4 to all your other withholding from Forms W-2 and report the total on your return. This reduces what you owe or increases your refund.
• Mistake #6: Using the wrong form
  Form 1040EZ is simple and quick, but you cannot use it if you have a taxable state tax refund. Fix: Check the form restrictions before you start. If you have taxable Box 2 income, you must use Form 1040.
• Mistake #7: Forgetting state taxes on unemployment
  While Form 1099-G handles federal reporting, don't forget that many states also tax unemployment compensation. Some states offer voluntary withholding; others don't. If your state taxes unemployment and you didn't have state taxes withheld, you might owe at tax time IRS.gov.

What Happens After You File

Once you've properly reported your Form 1099-G information and filed your 2014 tax return, here's what typically happens:

• IRS matching process: The IRS runs computer programs that match the Forms 1099-G in their database against the amounts reported on tax returns. This usually happens several months after the filing deadline. If everything matches, you'll hear nothing—which is good news.
• CP2000 notices: If the IRS finds a discrepancy—for example, you received $5,000 in unemployment (per their Form 1099-G record) but only reported $3,000 on your return—you'll receive a CP2000 notice proposing additional tax, plus interest and possibly penalties. These typically arrive 12-18 months after you file. If you receive one, don't panic. You have the right to respond, explain any errors, or provide documentation. Sometimes the IRS is wrong (perhaps they received an incorrect Form 1099-G that was later corrected).
• Refund processing: If you're expecting a refund and properly reported your Form 1099-G amounts, nothing about the form should delay your refund. The IRS typically issues refunds within 21 days for e-filed returns.
• State tax implications: Remember that Form 1099-G also has state income tax copies (Copy 1 and Copy 2). Your state tax department receives information about your state tax refunds and may send you their own notices if you incorrectly reported state-related items.
• Future Forms 1099-G: If you continue receiving unemployment or state refunds in future years, expect additional Forms 1099-G each January. The process repeats annually. Some states now offer online access, so you can download your form rather than waiting for mail.
• Audit possibility: While Form 1099-G issues alone rarely trigger audits, discrepancies or patterns (like consistently forgetting to report income) increase your audit risk. Keep good records of all government payments and how you reported them for at least three years IRS.gov.

FAQs

Q1: I never received my Form 1099-G. Do I still have to report the income?

Yes, absolutely. Your legal obligation to report income doesn't depend on receiving a form—it depends on actually receiving the income. If you collected unemployment or received a state refund, you must report it whether you received Form 1099-G or not. Most states now offer online access to Forms 1099-G through their unemployment or revenue department websites. You can also contact the issuing agency to request a duplicate.

Q2: My state refund was $800, but I only itemized $600 in state taxes last year. How is that possible?

This often happens when you had state tax withholding from your paycheck during the year. Your total state tax payments included both withholding and the $600 you itemized. The refund is based on your total payments, not just what you wrote checks for. Use the worksheet in the Form 1040 instructions—it considers all of this.

Q3: Box 3 of my Form 1099-G shows "2013." I received this form in 2015. Which tax return does it go on?

Box 3 tells you which tax year the refund relates to, not when you report it. You report the refund on your 2014 tax return (filed in 2015) because that's when you received the money. Box 3 just helps you determine whether the refund is taxable—you'd need to look at your 2013 return to see if you itemized.

Q4: I received unemployment in both California and New York after relocating. Will I get two Forms 1099-G?

Yes, you'll receive separate Forms 1099-G from each state. Add the amounts from Box 1 of both forms together and report the total on your federal return. For state tax returns, you may need to report only the unemployment from that specific state.

Q5: I paid back unemployment benefits after being audited and found ineligible. Can I deduct this?

Yes, but the method depends on timing. If you repaid in the same year you received the benefits, report only the net amount. If you repaid in a later year and the amount exceeds $3,000, you may be able to claim a tax credit instead of a deduction, which could be more beneficial. See the "Repayments" section in IRS Publication 525 for details.

Q6: Do I have to pay Social Security and Medicare taxes on unemployment compensation?

No. Unemployment compensation is subject to federal income tax (and usually state income tax), but it's not subject to Social Security or Medicare taxes. That's why Form 1099-G shows no Social Security or Medicare withholding—there isn't any.

Q7: My Form 1099-G shows an amount in Box 8 (trade or business income). What does this mean?

This checkbox indicates that the state tax refund shown in Box 2 is from a business-related tax, not a general income tax. If Box 8 is checked, report the refund on Schedule C or Schedule F (for farm income) as business income, not on line 10 of Form 1040. This is relatively rare and typically involves state taxes specifically on business profits rather than general state income taxes.

Sources: All information in this guide comes from official IRS publications available at IRS.gov, including:

• 2014 Instructions for Form 1099-G
• 2014 Form 1099-G
• Publication 525 (2014) - Taxable and Nontaxable Income

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