Form 1099-G: Certain Government Payments (2015) – A Complete Guide

What Form 1099-G Is For

Form 1099-G is an informational tax document issued by federal, state, or local government agencies to report certain types of government payments you received during the tax year. Think of it as the government's way of telling both you and the IRS about money they paid you that might be taxable income.

The form covers several types of payments, but the two most common are unemployment compensation and state or local income tax refunds. If you collected unemployment benefits in 2015, you'll receive this form showing how much you received. Similarly, if you got a refund from your state or local income tax, that refund might be taxable on your federal return if you previously deducted those state taxes as an itemized deduction—and Form 1099-G reports that amount.

Beyond these common scenarios, Form 1099-G also reports several other government payment types: Reemployment Trade Adjustment Assistance (RTAA) payments for workers displaced by foreign trade, taxable grants from government programs (especially energy-related subsidies), agricultural subsidy payments from the USDA, and Commodity Credit Corporation (CCC) loan market gains for farmers. Each type of payment appears in a different numbered box on the form, making it easy to identify what you received.

The form serves a dual purpose: it informs you of income you must report on your tax return, and it tells the IRS what the government paid you so they can verify your return is accurate. Government agencies must file this form with the IRS and send you a copy by February 1, 2016 (for tax year 2015).

When You’d Use It (Including Late and Amended Returns)

You'll receive Form 1099-G automatically in the mail—you don't request it. Government agencies are required to send it to you if you received reportable payments of $10 or more for unemployment compensation or state/local tax refunds, or $600 or more for RTAA payments, taxable grants, or agricultural payments.

For timely filing, you should receive your Form 1099-G by February 1, 2016, and you'll use the information when preparing your 2015 federal tax return (due April 15, 2016). The amounts shown on Form 1099-G get reported on various lines of your Form 1040, 1040A, or 1040EZ, depending on the type of payment.

If you need to file a late tax return (after April 15, 2016), you'll still need Form 1099-G for accurate income reporting. If you misplaced your copy, contact the issuing agency—most states allow you to download it from their website or request a duplicate by phone.

For amended returns, Form 1099-G becomes particularly important. If you discover you received a 1099-G you didn't report, you must file Form 1040X (Amended U.S. Individual Income Tax Return) to correct your return. Conversely, if you receive a corrected 1099-G after filing, you'll need to amend if the correction changes your tax liability. The government agency will issue a corrected form marked "CORRECTED" in the checkbox at the top. Keep all versions of your 1099-G forms for your records—the IRS may have received different information than you did, and you'll need documentation to resolve any discrepancies.

Key Rules or Details for 2015

Understanding the rules for each type of payment on Form 1099-G is crucial for accurate tax reporting. For unemployment compensation (Box 1), the entire amount shown is generally taxable as ordinary income and must be reported on your federal return. This includes all unemployment benefits, whether from your state unemployment agency or Railroad Retirement Board unemployment payments. If you made contributions to a governmental unemployment compensation program (like California's Family Temporary Disability Insurance) and received benefits, you may be able to exclude the portion that represents your own contributions—but only if you itemize deductions and treat your contributions as taxes paid on Schedule A. The 2015 instructions specify that married couples filing jointly must each figure their taxable unemployment amount separately if both received benefits.

State or local income tax refunds (Box 2) follow a more complex taxability rule. The refund is only taxable if you itemized deductions on Schedule A of your prior year federal return and actually received a tax benefit from deducting those state taxes. If you took the standard deduction in 2014, your 2015 state refund is not taxable—and the government agency may not even be required to send you Form 1099-G (though they must still file it with the IRS). Even if you didn't physically receive the refund—perhaps it was applied to your 2016 estimated state taxes, offset against other debts, or donated to charity—it's still taxable if you deducted it previously. Box 3 tells you which tax year the refund relates to; if blank, it's for 2014. Box 8 has a special checkbox: if marked, the refund relates to a business income tax and should be reported on Schedule C or F rather than as "other income."

Federal income tax withheld (Box 4) represents either voluntary withholding you requested or backup withholding (28% rate) if you failed to provide proper taxpayer identification. This amount should be claimed as a tax payment on your return, reducing your tax liability or increasing your refund.

Other payment types have specific reporting thresholds and requirements: RTAA payments (Box 5) of $600 or more must be reported on Form 1040's "Other income" line; taxable grants (Box 6) of $600 or more are generally taxable unless specific legislation exempts them; agriculture payments (Box 7) go on Schedule F for farmers; and market gain from CCC loans (Box 9) also reports on Schedule F. The 2015 instructions emphasize that federal grants are presumed taxable unless the authorizing legislation specifically says otherwise—don't assume a government grant is tax-free without checking.

Step-by-Step (High Level)

Step 1: Receive and Review Your Form

Start by carefully reviewing your Form 1099-G when it arrives. Check that all personal information is correct: your name, address, and Social Security number (which may be partially truncated for security, showing only the last four digits on your copy). Verify the payer's identification and contact information in case you need to request corrections.

Step 2: Identify Which Boxes Apply

Next, determine which boxes contain amounts and what they represent. The most common scenarios are Box 1 (unemployment) and Box 2 (state tax refunds). For unemployment compensation, simply note the amount—you'll report the full amount on your tax return. For state tax refunds, determine whether it's taxable by asking yourself: "Did I itemize deductions on my 2014 federal return?" If yes, the refund is likely taxable; if you took the standard deduction, it's not taxable, and you can disregard that box for federal tax purposes.

Step 3: Transfer to Your Tax Return

When preparing your 2015 tax return, transfer the information to the appropriate lines. Unemployment compensation from Box 1 goes on the dedicated "Unemployment compensation" line of Form 1040 (line 19), 1040A (line 13), or 1040EZ (line 3). If you received multiple Forms 1099-G for unemployment, combine all Box 1 amounts and report the total. State tax refunds from Box 2 (if taxable) are reported on the "Other income" line of Form 1040 or Schedule 1, unless Box 8 is checked—then they go on Schedule C or F. Any federal withholding from Box 4 gets added to your other tax payments on the "Federal income tax withheld" line.

Step 4: Keep Records

Keep your Form 1099-G with your tax records for at least three years (the standard IRS audit period), but preferably seven years for extra protection. You'll need it to respond to any IRS inquiries, and it provides important documentation if you later need to amend your return. Store it with your other tax documents for 2015, including your W-2s, other 1099 forms, and your filed tax return.

Common Mistakes and How to Avoid Them

Mistake #1: Forgetting to Report Unemployment Compensation

One of the most frequent errors is forgetting to report unemployment compensation altogether. Some taxpayers mistakenly believe unemployment isn't taxable because it's a benefit during hardship, but unemployment compensation is fully taxable at the federal level for 2015. Always report the full amount from Box 1 on your return—failing to do so will trigger an IRS matching notice when their computers compare your return against the 1099-G filed by the government agency. The IRS notice will assess additional tax, penalties, and interest, which is easily avoidable by reporting correctly from the start.

Mistake #2: Misreporting State Tax Refunds

Another common mistake involves state tax refund reporting. Many people automatically report the Box 2 amount without considering whether it's actually taxable. Remember: state refunds are only taxable if you itemized deductions in the prior year. If you took the standard deduction on your 2014 return, the refund in Box 2 is not taxable for federal purposes—you can safely ignore it. Conversely, some taxpayers who did itemize forget to report the refund, thinking it's not income because it's just "getting their own money back." The IRS requires you to recapture the tax benefit you received from deducting those state taxes initially.

Mistake #3: Misplacing or Ignoring the Form

Misplacing or ignoring the form is surprisingly common. Some taxpayers assume they didn't receive a 1099-G when they actually did, or they discard it thinking it's just informational. If you received unemployment benefits or a state tax refund in 2015, actively look for your Form 1099-G. If you can't find it, don't guess at the amounts—contact the issuing agency for a duplicate. Most state unemployment departments and tax agencies have online portals where you can access your 1099-G information. Never report estimated amounts; use the exact figures from the official form.

Mistake #4: Missing Additional Forms

Confusion about multiple forms also creates problems. If you collected unemployment in multiple states or received both unemployment and a state tax refund, you'll receive separate Forms 1099-G for each type of payment or each state. Some taxpayers accidentally report only one form, omitting others. Create a checklist of all government payments you received in 2015 and verify you have a corresponding 1099-G for each. Combine unemployment amounts from all forms and report the total; report each state refund separately if from different states.

Mistake #5: Overlooking Corrected Forms

Finally, watch for corrected forms. If you receive a Form 1099-G marked "CORRECTED" after you've already filed your tax return, compare it to the original. If the amounts changed significantly enough to affect your tax liability, you must file an amended return using Form 1040X. Set aside corrected forms separately and take action promptly—don't assume the IRS will automatically adjust your account.

What Happens After You File

After you file your 2015 tax return including the Form 1099-G information, the IRS processes your return and matches the income you reported against the information returns filed by government agencies. This computerized matching program compares every Form 1099-G filed with your name and Social Security number to your tax return. If everything matches, your return processes normally, and you'll receive any refund due or your account will show the tax paid.

If there's a discrepancy—for example, you didn't report unemployment shown on a 1099-G or you reported a different amount—the IRS will send you a CP2000 notice, typically arriving several months after you file (often 12-18 months later). This notice proposes changes to your return based on the mismatch. You'll have the opportunity to respond, either agreeing with the changes and paying additional tax, or explaining why the 1099-G information is incorrect. Common legitimate explanations include receiving a corrected 1099-G that the IRS didn't have on file, or demonstrating that a state refund wasn't actually taxable because you didn't itemize deductions.

If you voluntarily discover you forgot to include 1099-G income before the IRS contacts you, file Form 1040X to amend your return as soon as possible. Voluntary corrections usually result in lower penalties than IRS-initiated corrections. Include a complete explanation of the error and attach the Form 1099-G you failed to report originally.

For future years, note that if you had federal income tax withheld from unemployment compensation (Box 4) but it wasn't enough to cover your full tax liability, you may want to either request additional withholding or make estimated tax payments. The IRS provides Form W-4V for requesting voluntary withholding from unemployment, which can help you avoid a tax bill when you file.

Your Form 1099-G information also affects state tax reporting. Most states that have income tax also require you to report unemployment compensation, though some states don't tax unemployment benefits. Check your state's rules. State tax refunds shown in Box 2 generally aren't relevant for your state return—they already know about their own refunds.

FAQs

Q1: I received a Form 1099-G for unemployment, but I paid some of that money back because I was overpaid. Do I still report the full amount?

For 2015, yes—you must report the entire amount shown in Box 1 of Form 1099-G, even if you later repaid some of it. However, if you repaid unemployment in 2015 that was included in your income in an earlier year, you may be able to deduct the repayment. If you repaid more than $3,000, you might qualify for a tax credit under the "claim of right" rules. If you repaid unemployment in the same year you received it (2015), the government agency should issue a corrected 1099-G showing the net amount, but if they don't, report the full amount received and separately deduct the repayment on Schedule A if you itemize.

Q2: My Form 1099-G shows a state tax refund for 2014 taxes, but I took the standard deduction on my 2014 return. What do I do?

You don't need to report the state refund as income on your 2015 federal return. State refunds are only taxable if you itemized deductions in the year you paid the tax and received a tax benefit from the deduction. Since you took the standard deduction, the state refund provides no taxable benefit. You can safely ignore Box 2 for federal tax purposes (though you should still keep the form with your records). The government agency still files the 1099-G with the IRS, but you're not required to report it as income.

Q3: I never received a Form 1099-G, but I know I collected unemployment in 2015. What should I do?

Contact the unemployment agency that paid you immediately to request a duplicate. Most states allow you to access your Form 1099-G online through their unemployment portal, often available 24/7. You can also call their customer service line. Don't file your tax return without the correct information—guessing at amounts often leads to IRS notices later. If you absolutely cannot obtain the form before the filing deadline, use your records (bank statements, unemployment payment stubs) to calculate the total amount received, report it accurately, and keep documentation of your attempts to obtain the form.

Q4: Can I have taxes withheld from my unemployment benefits to avoid owing taxes when I file?

Yes, and this is highly recommended if you have no other income or insufficient withholding. For 2015 unemployment compensation, you can request federal income tax withholding by completing Form W-4V (Voluntary Withholding Request) and submitting it to your state unemployment agency. The standard withholding rate for unemployment is 10% of each payment. You can also make quarterly estimated tax payments using Form 1040-ES if you prefer to manage your tax liability that way. Many states also allow you to request state income tax withholding from unemployment benefits.

Q5: I received a state tax refund in 2015 for my 2014 taxes, but I also received interest on that refund. Do I report the interest?

Yes, interest on state tax refunds is always taxable as interest income, regardless of whether the refund itself is taxable. If you received $600 or more in interest, the state should send you a separate Form 1099-INT showing the interest amount. If you received less than $600 in interest, the state may include it in the blank area next to Box 9 on Form 1099-G with a note like "Interest Income." Whether or not it's separately reported to you, you must report all interest income on the "Taxable interest" line of your tax return (Schedule B if over $1,500 total interest). Don't confuse the interest with the refund itself when determining taxability.

Q6: My spouse and I both collected unemployment in 2015 and we're filing jointly. Do we combine our Forms 1099-G?

Yes, when filing jointly, you combine the unemployment amounts from both spouses' Forms 1099-G and report the total on your joint return. However, the 2015 instructions specify that each spouse should separately calculate their own taxable unemployment amount—this matters primarily if one or both of you made contributions to the unemployment program and are trying to exclude the portion attributable to your contributions. For most taxpayers who didn't contribute to the unemployment fund, simply add both Box 1 amounts together and report the combined total on the unemployment line of your Form 1040.

Q7: The amount on my Form 1099-G is wrong. What should I do?

Contact the issuing government agency immediately—their contact information appears on the form. Explain the discrepancy and request a corrected Form 1099-G marked "CORRECTED" in the checkbox. Common errors include the agency reporting payments made to someone else with a similar name or Social Security number, duplicate reporting of the same payment, or including payments from a different tax year. Don't file your tax return with incorrect information. Once you receive the corrected form, use those figures on your return. If you've already filed with the wrong information, wait for the corrected form, then file Form 1040X to amend your return. Keep both the original and corrected forms with your tax records.

Additional Resources

Sources: All information in this guide comes directly from official IRS publications for tax year 2015:

• 2015 Instructions for Form 1099-G: https://www.irs.gov/pub/irs-prior/i1099g--2015.pdf
• Form 1099-G (2015): https://www.irs.gov/pub/irs-prior/f1099g--2015.pdf

This guide is based on IRS guidance for tax year 2015. Tax laws and regulations change regularly—always verify current requirements at IRS.gov or consult a tax professional.

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