What Is Form 1099-G? Unemployment, Refunds, and Withholding

Form 1099-G is the information return a federal, state, or local government agency sends you to report taxable payments it made to you during the prior calendar year. The two payments it covers most often are unemployment benefits and refunds of state or local income tax, but it also picks up taxable grants, agricultural subsidies, and a few trade-related payments. If you got one, the agency has already sent an identical copy to the IRS, so the figures need to show up somewhere on your return.

Who Sends It and When

Any government agency that paid you $10 or more during the year has to issue a 1099-G.¹ State unemployment offices and state departments of revenue are the usual issuers, along with some federal and local agencies. Your copy is due by January 31 of the year after the payments were made.²

If February arrives and yours hasn’t, contact the agency directly. Most states also post the form inside your online unemployment or tax account, which is often the fastest way to get it. You still owe tax on the underlying income whether the paper copy reaches you or not.

Box 1: Unemployment Compensation

Box 1 shows the total unemployment benefits paid to you during the year, including benefits under state programs and payments to former federal employees and ex-military personnel.³ Collected benefits from more than one state? You’ll get a 1099-G from each and need to add the Box 1 amounts together.

Unemployment compensation is fully taxable at ordinary federal income tax rates.⁴ There’s no threshold that lets a portion escape. State treatment varies, and a few states exempt unemployment benefits from state income tax, so check the rule where you live before assuming you owe at both levels.

Box 2: State or Local Tax Refunds

Box 2 reports any state or local income tax refund, credit, or offset you received during the year.¹ Getting money back from the state doesn’t feel like income, which is why this box catches people out. Whether it’s actually taxable turns on what you did on last year’s federal return.

The Tax Benefit Rule in Plain Terms

If you took the standard deduction on your prior-year federal return, the Box 2 amount isn’t taxable. You never deducted those state taxes federally, so getting them back doesn’t produce income.² The agency isn’t even required to send you a 1099-G in that case, though many do anyway.¹

If you itemized, some or all of the refund may be taxable. You’re only taxed on the portion that actually reduced last year’s federal tax bill: the lesser of the refund itself or the amount by which your itemized deductions exceeded the standard deduction you could have claimed. The $10,000 cap on the state and local tax deduction in effect for 2018 through 2025 further limits this: if the cap kept you from deducting all the state tax you paid, a later refund of that tax often produces little or no taxable income.⁵

The Other Boxes at a Glance

Most people will find these blank, but if any of them contain a figure, here’s what they’re for.

Box 3 identifies the tax year the Box 2 refund relates to. It’s left blank when the refund is for the most recent tax year and filled in only for older years.⁶
Box 4 is federal income tax already withheld, whether voluntary withholding on unemployment or backup withholding on other payments. It reduces your final tax dollar for dollar.¹
Box 5 shows Reemployment Trade Adjustment Assistance payments of $600 or more to workers who lost jobs to foreign trade competition.³
Box 6 covers taxable grants from government programs, including energy conservation grants. State and local grants are generally taxable; federal grants are taxable unless their authorizing legislation says otherwise.¹
Box 7 reports USDA agricultural subsidy payments, which farmers report on Schedule F.¹
Box 8, when checked, means the Box 2 refund came from a tax that applies only to trade or business income. The refund then goes on Schedule C or F rather than Schedule 1.³
Box 9 is market gain from repaying a Commodity Credit Corporation loan.¹
Boxes 10a, 10b, and 11 carry state information and any state income tax withheld; they don’t affect your federal return.¹

Where the Numbers Go on Your Return

Unemployment compensation from Box 1 goes on Schedule 1 (Form 1040), Line 7, and flows into your adjusted gross income.⁷

A taxable state or local refund from Box 2 goes on Schedule 1, Line 1.⁷ Use the Line 1 instructions and the state and local tax refund worksheet to figure the actual taxable portion under the tax benefit rule. If you took the standard deduction the prior year, skip the worksheet: none of the refund is taxable.

Federal income tax withheld from Box 4 doesn’t go on Schedule 1 at all. It goes on the Payments section of Form 1040 along with your W-2 withholding. RTAA payments from Box 5 go on the “Other income” line of Schedule 1, and agricultural payments from Box 7 go on Schedule F.³

Withholding on Unemployment So You’re Not Surprised in April

Unemployment benefits don’t come with automatic withholding the way a paycheck does. You have two ways to keep the tax bill manageable.

The first is voluntary withholding. Submit Form W-4V to your state unemployment agency to have a flat 10% withheld from each payment.⁸ Ten percent is the only rate available for unemployment; you can’t pick a different figure. Whether it’s enough depends on your total income, but it prevents the worst outcome.

The second is quarterly estimated tax payments to the IRS.⁴ These let you match the payment to your actual bracket, which matters if you have other income. Skip both, and if you owe more than $1,000 at filing, the IRS can add an underpayment penalty.

Missing Forms, Errors, and Identity-Theft 1099-Gs

If your 1099-G shows a wrong amount, contact the agency that issued it. The IRS can’t change someone else’s information return. Ask for a corrected form and keep notes of every call, email, and letter in case it takes a while.

A worse scenario is receiving a 1099-G for unemployment benefits you never applied for or collected — a sign someone filed a fraudulent claim in your name. Report it to the state unemployment agency that issued the form and ask for an amended 1099-G showing zero benefits.⁹ Most states have a dedicated fraud portal for this.

If the state doesn’t produce a corrected form before your filing deadline, file an accurate return that reports only the income you actually received rather than missing the deadline.⁹ Also file Form 14039, the Identity Theft Affidavit, with the IRS. The IRS identity theft hotline at 800-908-4490 can help.¹⁰

What Happens If You Just Leave It Off

Because the IRS already has its copy, unreported 1099-G income is one of the fastest ways to trigger an automated notice. The accuracy-related penalty for negligence is 20% of the underpaid tax, and the IRS specifically treats failing to report income shown on an information return as evidence of negligence. Interest also runs on the unpaid amount from the original due date. A substantial understatement — tax understated by more than 10% of the correct tax, or $5,000, whichever is greater — carries the same 20% penalty.¹¹

Copy B of the form itself warns that a negligence penalty or other sanction may apply if the income is taxable and you don’t report it.³ Even if you’re confident nothing is taxable — for example, a state refund that washes out under the tax benefit rule — running it through the worksheet and letting it come out to zero is safer than leaving it off the return entirely.

1
Internal Revenue Service. Instructions for Form 1099-G (03/2024)
2
Internal Revenue Service. About Form 1099-G, Certain Government Payments
3
Internal Revenue Service. Form 1099-G (Rev. March 2024) Certain Government Payments
4
Internal Revenue Service. Unemployment Compensation
5
Internal Revenue Service. Revenue Ruling 2019-11, Section 111 Recovery of Tax Benefit Items
6
Internal Revenue Service. Instructions for Form 1099-G (Rev. March 2024)
7
Internal Revenue Service. 2025 Schedule 1 (Form 1040)
8
Internal Revenue Service. Form W-4V (Rev. January 2026) Voluntary Withholding Request
9
Internal Revenue Service. What to Do When a W-2 or Form 1099 Is Missing or Incorrect
10
Internal Revenue Service. Reporting Identity Theft
11
Internal Revenue Service. Accuracy-Related Penalty