What is the Illinois 1099-G Form?

A Form 1099-G is a tax statement sent to anyone who received unemployment benefits, overpaid state taxes, or deducted their state income taxes on federal Form 1040, Schedule A. Information on Form 1099-G is also provided to the Internal Revenue Service by the same agency that sends the form to the taxpayer. Unemployment benefits are taxable the same way earned income is taxable. Taxpayers should know what information this form contains and its importance to ensure all taxable income is reported correctly to the Internal Revenue Service before submitting their taxes.

What Is Form 1099-G?

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Form 1099-G is mailed to recipients by federal, state, or local governments if they’ve received payments of:

  • Unemployment compensation.
  • State or local income tax refunds, credits, or offsets.
  • Reemployment trade adjustment assistance (RTAA) payments.
  • Taxable grants.
  • Agricultural payments.

Government agencies also file this form if they received payments on a Commodity Credit Corporation (CCC) loan. The government unit that controls the payments received or made must file Form 1099-G.

The Illinois Department of Revenue issues a Form 1099-G to report the amount of overpayment of state taxes over a year. This overpayment may be taxable income. The overpayment may have been received as a refund, carried forward for subsequent tax years, donated to charity, or applied to other liabilities. For federal tax purposes, when the amount on Form 1099-G is reported as income on a federal tax return, it’s subtracted from Illinois taxable income because the amount is not taxable to Illinois.

Form 1099-G is used for tax filing for all unemployment benefits, including the Federal Pandemic Unemployment Compensation (FPUC), Pandemic Unemployment Assistance (PUA), Pandemic Emergency Unemployment Compensation (PEUC), Lost Wages Assistance (LWA), and Extended Benefits (EB). Base unemployment is calculated on total quarterly wages and is roughly half of your prior wages. Unemployment benefits have changed for some workers, benefiting many who are out of work. However, these benefit could potentially affect many people’s taxes.

If your income is low or has dropped over the last year, you may qualify for the Illinois Earned Income Tax Credit. This tax credit allows those with low or modest incomes to receive larger tax refunds. The Earned Income Tax Credit reduces the amount of total taxes owed. Note that the Earned Income Tax Credit is not reported as income on a Form 1099-G since it’s not an itemized state tax payment for federal purposes.

Why Is a Form 1099-G Necessary?

Form 1099-G reports potentially taxable payments received from government agencies and needs to be filed with your taxes.

The form is required if you deducted your state income taxes on your U.S. Form 1040, Schedule A and your state tax payments exceed your tax liability by $10 or more. In other words, you need a Form 1099-G if you received a tax refund, applied your overpayment to the next year, or used your overpayment for another liability.

The tax overage amount is calculated using tax payments minus state income tax liability. This calculation includes estimated payments, credit transfers, return payments, amendments to tax payments, payments under extension, income tax credits, and pass-through payments. The tax liability doesn’t include any penalties or interest.

Some taxpayers may receive a Form 1099-G for a dollar amount that’s more significant than their refund if all or part of their refund was used for the following reasons:

  • To cover use tax.
  • To pay penalties and interest, such as a late estimated payment penalty.
  • To pay a prior year’s liability or other tax liability.
  • To cover a federal, state, or municipal offset.
  • To make a voluntary donation on Schedule G.

The full dollar amount of the original overpayment is still reported on the Form 1099-G as income. Taxpayers who receive multiple refunds or overpayments in a tax year will only receive one Form 1099-G for the tax year.

Some taxpayers may receive a Form 1099-G for a dollar amount less than their refund. This difference is due to the Earned Income Tax Credit application for those with low or moderate incomes.

Form 1099-G is also provided to recipients of unemployment benefits for tax purposes, as unemployment is taxable by state and federal governments. If you received more than one Form 1099-G, add all amounts from Box 1 Unemployment Compensation and enter the total on Line 19 of Form 1040. Similarly, if you receive more than one Form 1099-G for other government payments, add the amounts together.

How Do I Submit a Form 1099-G?

Form 1099-G needs to be returned with your tax filing. This form is supplied by the governmental agency that makes or receives payments and should be mailed to you. It’s also is available online. If you believe you should receive a Form 1099-G, submit a 1099-G Inquiry online through the Illinois Department of Revenue.

Boxes on the form list taxpayer totals for unemployment, refunds, reemployment trade adjustment assistance payments, taxable grants, agricultural payments, and market gain. The form also specifies federal and state income tax withholding.

The payer’s name, address, and Federal Identification Number are listed, as are the recipient’s name, address, and Identification Number, usually their Social Security number. If errors have been reported and fixed, there will be a checkmark for the “corrected” box.

Taxpayers who receive a refund or overpayment of taxes after December 31 will have that dollar amount reported on the following year’s Form 1099-G.

Form 1099-G is an important form to review for accuracy since its information is reported to the Internal Revenue Service. If you’ve collected unemployment or received tax credits or other offsets, be sure to submit Form 1099-G with your income taxes. Unemployment is taxable income, but other tax credits may or may not be taxable. If you aren’t sure you should receive this form, check online.

If you aren’t sure about Form 1099-G or if you owe taxes on unemployment benefits or tax overpayments, please contact us at Pasquesi Sheppard. We’ll be happy to ensure you properly file all forms and take advantage of tax laws that minimize your taxes owed.