On your federal tax return, Form 1099-G amounts go on Schedule 1 first and then flow to Form 1040. Unemployment compensation from Box 1 is entered on Schedule 1, Line 7. Any taxable portion of a state or local tax refund from Box 2 goes on Schedule 1, Line 1. The Schedule 1 total then carries to Form 1040, Line 8 as part of your income. Any federal income tax withheld in Box 4 is added to your other withholding on Form 1040, Line 25b.
Box-by-Box: Where Each Amount Belongs
The 1099-G covers several different government payments, and they don’t all go to the same place. Match the box on your form to the line below.
- Box 1, Unemployment compensation: Schedule 1, Line 7.
- Box 2, State or local income tax refunds: Schedule 1, Line 1, but only the taxable portion (see below).
- Box 3, Tax year for the Box 2 refund: not a dollar entry; it tells you which prior year’s return to look at when checking taxability.
- Box 4, Federal income tax withheld: Form 1040, Line 25b.
- Box 5, Reemployment Trade Adjustment Assistance (RTAA) payments: treated as unemployment-type income.
- Box 6, Taxable grants: depends on the grant’s nature; business grants go on the appropriate business schedule, others as other income on Schedule 1.
- Box 7, USDA agricultural subsidy payments: Schedule F, Line 4a (disaster payments on Line 6a).
The IRS receives its own copy of the form, so the income needs to appear on your return whether or not the paper copy reached you.1Internal Revenue Service. Instructions for Form 1099-G
Unemployment Compensation from Box 1
Unemployment benefits are taxable as ordinary income at the federal level, treated the same as wages.2Office of the Law Revision Counsel. 26 USC 85 – Unemployment Compensation Report the full Box 1 amount on Schedule 1, Line 7. There is no general exclusion. The temporary $10,200 exclusion applied only to the 2020 tax year and does not carry to any later year.
If tax was withheld from your checks, Box 4 shows the amount. That figure is added to your W-2 and other withholding on Form 1040, Line 25b.3Internal Revenue Service. Unemployment Compensation If nothing was withheld and you want to change that going forward, submit Form W-4V to your state unemployment agency; the only rate available for unemployment is a flat 10% of each payment.4Internal Revenue Service. Form W-4V, Voluntary Withholding Request
Repaid benefits are handled differently depending on timing. If you repay in the same year you received the benefits, reduce the Line 7 amount by the repayment. If you repay more than $3,000 in a later year, Section 1341 lets you choose between a deduction in the year of repayment and a credit equal to the tax you would have saved by never reporting the income, whichever gives the lower tax.5Office of the Law Revision Counsel. 26 USC 1341 – Computation of Tax Where Taxpayer Restores Substantial Amount Held Under Claim of Right For later-year repayments of $3,000 or less, no deduction is generally available.
State or Local Tax Refunds from Box 2
Box 2 needs a decision before anything reaches your return. The amount is not automatically income. Whether any of it is taxable depends on how you filed the year you paid that state or local tax.
If you took the standard deduction that year, none of the refund is taxable. Same result if you itemized but chose to deduct state sales tax instead of state income tax. In either case, leave Schedule 1, Line 1 blank or enter zero.6Internal Revenue Service. 2025 Instructions for Form 1040
If you did itemize and deducted state income taxes on that prior year’s Schedule A, only the portion of the refund that actually gave you a tax benefit is taxable. The quick version: compare that year’s itemized deductions to the standard deduction you could have claimed. If your itemized deductions didn’t exceed the standard deduction, none of the refund is taxable. If they exceeded it by more than the refund, the whole refund is taxable. If they exceeded it by less than the refund, only the excess is taxable. Whatever comes out of that calculation goes on Schedule 1, Line 1.7Internal Revenue Service. Schedule 1 (Form 1040) – Additional Income and Adjustments to Income
Some situations require a longer calculation than the simple worksheet. Publication 525 has the detailed “Recoveries of Itemized Deductions” method for a refund tied to a year other than the immediately preceding one, a year you owed alternative minimum tax, a year with unused credits, or a case where your last estimated state tax payment for the year was actually made in the following year.8Internal Revenue Service. Publication 525 – Taxable and Nontaxable Income The SALT deduction cap in effect for the year you claimed the deduction also matters, because it limits how large a tax benefit you could have received in the first place.9Office of the Law Revision Counsel. 26 USC 164 – Taxes
Agricultural Payments and Grants from Boxes 6 and 7
USDA agricultural subsidy payments in Box 7 don’t go through Schedule 1. Enter them on Schedule F (Profit or Loss From Farming), Line 4a. Disaster payments from agricultural programs go on Schedule F, Line 6a.10Internal Revenue Service. Instructions for Schedule F (Form 1040) The net farm income from Schedule F ultimately reaches Schedule 1.
Box 6 covers taxable grants, including energy-related grants and grants from state, local, or tribal government programs. These are generally taxable unless the authorizing legislation says otherwise.1Internal Revenue Service. Instructions for Form 1099-G A business-related grant is reported on the business income schedule that fits the activity. A grant tied to a personal item, such as certain energy improvements, is typically reported as other income on Schedule 1.
How It All Reaches Form 1040
The paths converge at a few lines:
- Taxable state or local refund (Box 2): Schedule 1, Line 1.
- Unemployment compensation (Box 1): Schedule 1, Line 7.
- Schedule 1, Line 10 total: carries to Form 1040, Line 8.
- Federal tax withheld (Box 4): Form 1040, Line 25b, together with your other withholding.
- Agricultural payments (Box 7): Schedule F, then into Schedule 1 as farm income.
If Your 1099-G Reports Benefits You Never Received
Unemployment identity theft has produced a wave of incorrect 1099-G forms. If yours shows benefits from a claim you never filed, do not report that amount on your return. Contact the state agency that issued the form, report the fraud, and request a corrected 1099-G showing zero benefits.11Internal Revenue Service. Identity Theft and Unemployment Benefits
File your return with only the income you actually received. You do not need to wait for the corrected form, and you do not need to file Form 14039 for unemployment identity theft alone. That affidavit is only necessary if your return is rejected because someone already filed using your Social Security number, or if the IRS specifically asks for it. The Department of Labor keeps a directory of state contacts for unemployment fraud at DOL.gov/fraud.