Among the various tax forms I have been receiving lately is a 1099-G from my state. It says it’s for the state income tax refund I received last year.
I received a state income tax refund last year because I had too much withheld in the previous year. The refund was returning my own money back to me.
A refund isn’t income. If I return something to a store, the store doesn’t issue a 1099 to me for the refund. Why does the state issue a 1099 to me for the tax refund? Am I going to be taxed on a return of my own money?
Not Automatically Taxed
Just because you get a 1099 doesn’t mean you will automatically pay tax on it. The instructions on the form say
"It may be taxable to you if you deducted the state or local income tax paid on Schedule A (Form 1040)."
When it says it "may be taxable" with a conditional "if" it means the tax refund dollars in box 2 on the 1099-G are NOT taxable if you didn’t deduct it on your federal income tax return. And even if you did deduct, it still may not be taxable.
Taxable If You Over-Deducted
When you deduct state income tax on your federal return, you are deducting the withheld amount, not the actual amount you end up paying. Therefore if you get a refund from the state, it means you deducted too much in the previous year. That’s why you may have to add back the refund as income in the following year, even though a tax refund isn’t really income. The 1099-G is compensating for the over-deduction in the previous year.
Re-Do Your Taxes
However, just because you over-deducted, it doesn’t mean you actually benefited from the over-deduction. If you didn’t deduct as much as you did, maybe you would’ve used the standard deduction. There are limits to itemized deductions at some income levels. AMT also excludes state income tax from the deductions.
You are supposed to re-do your previous year’s taxes with the actual amount of the state income tax you should’ve paid and see how much you really benefited from the over-deduction.
If your state income tax refund is $2,000 and you benefited from all of it, you include $2,000 as income in the following year. If you only benefited from $1,000 of it, you include $1,000 as income in the following year. If you didn’t benefit from the over-deduction at all because you were on AMT, you don’t include anything from the tax refund.
Re-doing the previous year’s taxes just because of a state income tax refund is a big headache if you do your taxes by pencil and paper. If you use software, you hope the software will take care of it. If you use a CPA, the CPA may charge you extra for the extra work. The best way would be slightly under-pay your state each year but still stay away from any underpayment penalty; that’s not so easy to manage.
Unemployment Income Is Taxable
1099-G is also used for reporting unemployment income from the state. That number is reported in Box 1 on the form. Unemployment income is taxable.
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Make Money Make Cents says
I received a 1099-G for the last two years. I dont believe that I had to actually pay taxes on it. I guess I will find out when I do my taxes next week!
I am confused. I am doing my taxes and it is stating that there is income on either a 1099-R, a 1099-G or a 1099-S form. This just popped up while I was preparing my taxes. I have not received any of these forms. I did not have any of the listed distributions(1099-R)/ (No Unemployment 1099-G) and I have not sold Real Estate.
I looked each of these forms and they do not apply despite the fact taxes were withheld. (Federal AND State..NY) I do not want to just go forward and have any problems or an audit!!
Any suggestions as to what I should/can do?
The worst thing you can do is make a estimated state payment in January and then get a refund. Some of that refund came from payments made the previous year which you deducted on your federal return, but part of the refund is from your January payment that you haven’t deducted yet. As a result, you have to apportion your refund between the two tax years and then do the benefit calculation. Rinse and repeat the year after.
I agree ajk. That’s why I started making all my estimated payments for January in December. It was too much for my tiny brain.
I received a 1099-G for the state I live in. I had to work approximately 10 days in NY which my employer did not take any NY taxes out. When I did my taxes, I ended up with a refund overall. My question is…since I paid in NY but I received 1099-G for the state I live in, can I net the difference as income on my federal return.
Harry Sit says
Kelli – No. The tax you paid to NY may be deductible though (if you itemize and you are not subject to AMT).
I live in California and itemize my California taxes. I sold my Hawaii timeshare and 720 dollars was taken out for withholding and paid to the State of Hawaii. I received a the 720 dollars back after submitting paperwork to Hawaii that the sale was a capital loss. I received a 1099G from Hawaii for the 720 dollars. Do I need to report the 1099G as income on my Federal tax and if so where?
Ron Y says
How did you resolve this issue? I have the same problem for tax year 2017: I also live in California and sold property in Hawaii. The state of Hawaii withheld 5% of the price for out of state residents and I submitted paperwork and got the entire amount back. The property was sold in 2017 and I received a 1099G indicating the refund for tax year 2017.
I itemize my taxes. Can I just not include the tax withheld from my Schedule A and also not include it in as a tax refund in from 1040?
If my only income was from 1099g am I required to file a tax return?
gary v pennington says
On the form 1099-G in box 3 it says I have a 289.00 state tax refund from 2015,
I didnt receive a state refund for 2015, So is it saying Ihave to pay that might ammount???
j wyatt says
I just got one and im wondering the same because i didnt get my state tax refund for 2015!
You may have been due a refund, which should have been reflected on your state return, but it was kept by the taxing agency to reduce a previously existing tax liability. If your state return did not indicate a refund, then you need to contact the state taxing agency to clarify why they think you got a refund.
Me and my fiancé both got a 1099-g form! We live in Mississippi and worked in louisianna. Louisianna sent us the form and it says in box 1 on mine $97. I got a refund last year, I have no idea what this form is for.
I just got one too and I’m thinking what the deuce! It sounds like I’m going to have to found a refund as income?????
I live in texas. I got one from the state of cali, worked there for 2 weeks in 2015. I ended up getting a small 300$~ refund.
Now in 2016 taxes, they are are wanting me to pay taxes on my refund? They are treating my REFUND, as income? They have got to be kidding? Well nevermind, i guess it is cali.
I’ll just avoid that state for the rest of my life.
I gor a 1099g for 2015 if i dont have income for 2016 do i still have to do taxes on this
Linda Morasse says
We put in a solar system last year. The state of New Hampshire (we have no income tax) had a promotion of $2500 for anyone who bought one. They sent us a 1099-G form showing the $2500. How do I report this on my IRS tax forms? Is it income?
I got a 1099g for my state refund that was taken last year for my husband’s fines and I’m not sure if I need to file it or what its for can someone please help me.
Ron Y – did you get a response from Mike? I’m using TurboTax and it’s asking me to input the 1099-G from Hawaii … I also sold a timeshare in 2016 and got the entire tax amount back in 2017. I don’t think this is considered income but I’m afraid to not disclose it.
I forgot that I had received unemployment benefits in New Jersey. I filled my taxes and then received the 1099g form of 1000$ and the tax withheld is 0$ do I have to add it to my return if so when is the ideal time to do so and what is the percentage I would pay on the 1000$ if any
Harry Sit says
Unemployment income is taxable. You do need to add it to your return. Just amend the return if you already filed. If you used software, the software will re-calculate the new amount.
Why I received 1099-G 2018’ from state of Hawaii? I know that only one reason, My husband withheld state tax was high last year.
I ordered tax return same CPA every year, and CPA told me that I don’t need to do anything for this. But Do I have to do something?
NVM, I’ve just talked with Hawaii taxation. They sent me 1099-G for just information of previous refund.
I received a 1099G and box 1 is filled out but nothing in box 2. When I go into my tax software to add it, it doesn’t give me an option to enter the amount for box 1 only box 2 (which is blank). What do I do?
Just continue because all it’s worried about is Federal not state, you don’t have to report state income, just Federal.