What is a 1099-G tax form?

The most common use of the 1099-G is to report unemployment compensation as well as any state or local income tax refunds you received that year.

If you received a 1099-G Form this year from a government agency, you may need to report some of the information it contains on your tax return. The most common use of the 1099-G is to report unemployment compensation as well as any state or local income tax refunds you received that year.

Taxable unemployment compensation

Generally, you must include in taxable income any unemployment compensation from a state government. Box 1 of the 1099-G Form shows your total unemployment compensation payments for the year. Regardless of whether you file a 1040, 1040A or 1040EZ, the form includes a separate line for unemployment compensation in the income section. The amount from box 1 needs to be included in your income, but it is not necessary to attach the 1099-G to your tax return.

State tax refunds

When you receive a refund, offset, or credit of state or local income tax, that amount appears in box 2 of the 1099-G form. However, you don't necessarily have to report this amount on your federal tax return or pay additional federal taxes. You only need to report it as federal income if you took a federal deduction for paying those taxes in a prior year and that deduction actually reduced your federal taxes. Box 3 of the form will indicate the relevant tax year.

1099-G box 2 example

Suppose your state requires your employer to withhold state income taxes from your salary and wages. If you itemize your deductions on Schedule A instead of taking the standard deduction, the IRS allows you to deduct the state income taxes you paid.

Often, the total amount of state income tax withheld from your pay will exceed the amount of tax you’re actually responsible for paying at the end of the year.

• For example, suppose $5,000 is withheld from your 2016 wages for state income tax.

• After preparing your state income tax return, you find you only owe $3,500. The state should send you a refund of $1,500 in 2016.

• However, let's say you prepared your 2016 federal income tax return and took a deduction for state income taxes of $5,000 that reduced your federal taxes.

• When you prepare your 2017 tax return, you'll need to report the $1,500 refund as income since you took a deduction for the full $5,000 but then got $1,500 back.

If in the previous year you deducted state and local sales tax instead of state income tax on your Schedule A, or took the standard deduction instead of itemizing your deductions, it is not necessary to report the amounts in box 2 since these stat taxes did not reduce your federal tax for that year.

If box 8 of your 1099-G is checked, it indicates the amounts reported in box 2 relate to a trade or business you operate.

Other 1099-G boxes

There are nine other boxes on the form that may have show amounts or other information.

• Boxes 4, 10a, 10b and 11 report information about the federal, state and local income taxes withheld from any government payments you received.

• Box 5 reports certain trade adjustments.

• Box 6 shows any taxable grants you receive from government agencies.

• Box 7 shows any payments you receive from the Department of Agriculture.

• Box 9 shows the market gain on certain types of loans only available to farmers.

TurboTax will guide you through selecting the correct information from Form 1099-G.

Brought to you by TurboTax.com

 

Taxpayer Beware: Email Phishing Scams

The IRS reported a 400% rise in phishing scams during the 2016 tax season. Phishing schemes are designed by cyber criminals who attempt to lure unsuspecting victims into revealing their personal and financial information, usually through unsolicited emails. You can avoid becoming a victim of fraud if you know what to look for.

Read More

Brought to you by TurboTax.com

Can I Deduct My Computer for School on Taxes?

You may be able to get back the cost of that computer you're using for school on your income taxes.

Read More

Brought to you by TurboTax.com

What Are Income Tax Rates?

Confused by what percentage of your income goes to taxes and why it does not match the rate in the tax table? Here are the basics on how income tax rates work.

Read More

Brought to you by TurboTax.com

Can Cellphone Expenses Be Tax Deductible with a Business?

Cellphones have become just as vital to business as a land line, which makes cellphone use a legitimate, deductible business expense. But for most of us, cellphones are also inextricably linked to our personal lives, so it’s a deduction that the IRS scrutinizes very carefully to make sure personal electronics use isn’t being claimed as a business expense.

Read More

Brought to you by TurboTax.com
Read Full Story