What is a 1099G?

What is a 1099G?
Form 1099G shows payments made to you by a government entity. The payment may be for such
things as serving on a government commission, per diem employment payments, or a taxable state
refund.
These following frequently asked questions and the answers pertain to the VT Taxable State Refund.
Who Issues The 1099G For VT?
The VT Department of Taxes issues the 1099G based on information from your VT income tax return.
A 1099G issued for a payment by other VT government agencies generally comes from the VT Finance
Department.
When Is The 1099G Issued?
The Department mails the 1099G on or before January 31, 2007 for refunds received in 2006.
Who Gets A 1099G?
The IRS requires the VT Department of Taxes to send a 1099G to taxpayers who itemized deductions on
their Federal income return and received a VT state tax refund of $10 or more for tax year 2005. The
Department uses a list from the IRS of Vermont taxpayers who did not itemize their deductions in 2004.
It is presumed that all other taxpayers itemized deductions.
What If I Itemize For Tax Year 2005 But Will Not Itemize On 2006 Federal Income Tax Return?
The amount on the 1099G may still be taxable. The IRS provides instructions and a worksheet for Line
10 of the Federal 1040 to calculate whether the refund is taxable.
Do I Need To Do Anything With The 1099G?
Keep the 1099G with your tax documents. You will use the 1099G when filing your 2006 Federal income
tax return. The 1099G shows the amount of VT tax refund issued in 2005 for tax year 2005 or a refund
for an amended prior year but issued in 2006. Some or the entire amount may be taxable income for
2006 tax year. There is a worksheet in the Federal Form 1040 instructions to calculate the taxable
amount.
What Is A Taxable Vermont State Tax Refund?
The IRS defines a taxable state refund as an overpayment of state income tax refunded to you as a
refund check, credit towards a tax, or an offset. An offset occurs when all or a part of the refund is taken
to pay a tax or other government debt.
The VT Taxable State Refund is the amount your 2004 withholdings, income tax payments and eligible
tax credits or property tax rebate (Line 19 of Form HS-139) that exceed your VT income tax liability.
How Is The 2005 VT Taxable State Refund Calculated?
The Vermont taxable income tax refund is the amount of 2005 withholding, estimated payments
and application of 2004 income tax refund to 2005 tax year plus tax credits that exceed the 2005
income tax liability.
2005 VT Tax LESS
2005 VT Tax Credits
+ 2005 VT Withholding Payments
+ 2005 Estimated Payments
+ VT Real Estate Withholding
+ WH-435 Payments
+ Low Income Child Care Credit
EQUALS
1099G Amount
1
Why Is The VT Taxable State Refund Different On Federal Form 1099G From Line 32 Of My 2004
VT Income Tax Return?
There are several reasons why the amount of your VT Taxable State Refund on the 1099G may differ
from the refund amount on the Line 32 of 2004 VT income tax return or the refund check amount.
1. An Offset Of The Refund For A Bill
All or part of your refund may have been deducted to pay an outstanding bill claimed by a VT
government agency or the IRS. This is an offset. The taxable refund will show as calculated by tax
less payments and credits. This is your refund amount but it was used to pay a government debt.
The government agency or IRS sends you notice that your income tax refund may be claimed for the
bill. You need to go to the government agency or IRS for information and details on the bill.
2. A Tax Payment Was Made In 2006
Payments for 2005 income tax made with an extension request or paid with the return at filing are not
included as part of your VT Taxable State Refund. These payments were not part of the prior year’s
income tax itemized deductions.
NOTE: If 2005 estimated payments were paid in 2005, use the Federal worksheet in the IRS 1040
instructions to determine if the VT Taxable State Refund needs to be adjusted.
3. Adjustment To Your Return
The department may have made changes to your return. You will receive an explanation notice
showing return lines with your entry and the Department’s changes.
4. Use Tax Reported On 2005 VT Form IN-111 Line 27
The Use Tax payment is included as part of the VT Taxable State Refund. The Use Tax is
deducted from the refund to pay the tax. This is an offset. The refund shown on the 1099G will be
the Vermont income less tax payments and credits.
The Use Tax line on the income tax return is provided as a convenience for the taxpayer. Otherwise,
the taxpayer would be required to complete a different tax form. The reporting of Use Tax on the
income tax return is the equivalent of paying the sales tax to the retailer. There is no Federal
itemized deduction available for Sales and Use Tax.
5. VT Contributions On Form IN-111 Line 29d
The Vermont Contribution is included as part of your VT Taxable State Refund. This is your income
tax refund amount but you elected to make a contribution and the amount is deducted from the
refund. This is an offset. The refund shown on the 1099G will be the Vermont income tax less
income tax payments and credits.
Please note that when you file your Federal itemized deductions, you may be eligible to deduct the
Vermont Contributions as charitable contributions.
6. Designating A Refund As An Estimated Payment
If you made elected to apply all or a portion of your Line 32 refund to the next year’s estimated
income tax payments, this amount will be included as part of the taxable income tax refund. It is
treated as if you elected to “spend” a portion of your refund to make an estimated income tax payment.
What If The Amount Does Not Look Correct?
First, please go back to the tax return and use the formula to calculate the 1099G amount. If you still
cannot solve the discrepancy, contact the department. You may call 1-866-828-2865 (toll-free in VT) or
802-828-2865 (local or out-of-state calls) or send an e-mail to tax-indincome@state.vt.us.
2