What is IRS Form 1099-G?

Form 1099-G is an information return that is used by federal, state and local government entities to report certain payments. You’re required to file and furnish Form 1099-G if you made the following types of payments: unemployment compensation; state or local income tax refunds, credits or offsets; ATAA and/or RTAA payments; taxable grants; agricultural payments; and you must also file this form if you received payments on a commodity credit corporation or CCC loan. More details on the types of payments reportable can be found in the instructions for Form 1099-G, also available via www.irs.gov.

 

What is 1099-G Furnishing Requirement?

In general the furnishing requirement is met by providing the recipient or payee with a paper copy of Form 1099-G by January 31 of the year following the year of payment. You must also file a copy of the 1099-G with the IRS before February 28, unless you file electronically, which allows for a due date of April 1 of the same year. The Internal Revenue Code and regulations allow for most information returns to be furnished electronically.

 

Allowable Returns and 1099-G

A complete list of allowable returns is found on pages 30 and 31 of the Pub 1179, again under Section 4.6, Electronic Delivery of Recipient Statements. The most common returns used by FSLG entities are the Form 1099-G for certain government payments; Form 1099-INT for interest income; Form 1099-MIS, miscellaneous income; the Form 1099-R, distributions from pensions, annuities, retirement or profit sharing plans, IRAs, insurance contracts, etc. – I know that’s a long title; Form 1098-E for student loan interest statements; Form 1098-T for tuition statements; and lastly, Form W-2G, for certain gambling winnings.

 

Why migrate to furnishing Form 1099-G electronically?

There are quite a few advantages to it. Your entity may recognize significant cost benefits that result when paper and printing costs are reduced, mailing processes and fees are reduced if not eliminated, paper handling costs from filing, sorting, storing and shredding are reduced; eliminating re-typing and/or editing of documents reduces costs; and finally, accessibility is a factor. Distribution via secure web access and email is usually most cost-effective and convenient.

 

After Filing 1099-G

Once your organization commits to electronically furnished 1099-G, how must it be done? We would like to take this opportunity to review the requirements for setting up a system for furnishing 1099-G electronically. In general, the entity will request affirmative consent, receive and document the consent, provide required notifications, and furnish statements to consenting payees electronically

Section 401 of the Jobs Creation and Worker Assistance Act of 2002 established that, in order to use electronic deliveries and information returns to payees, the payer must obtain an affirmative consent from each recipient to whom a statement will be furnished electronically. The consent must be made by the recipient electronically in a way that confirms that the recipient can access the statement in the same electronic format in which it will be furnished. For example, if the Form 1099-G will be delivered as a portable document format, or PDF file, then the affirmative consent document format should also be in PDF. In addition, the payer must make certain notifications to each consenting individual.

 

Form 1099-G Deadlines

The government entity must place electronically posted Forms 1099-G on the applicable web site by January 31, the due date, and the statement must remain available until at least October 15 of that year. When Forms 1099-G are posted, the issuing entity must notify the consenting payees, either electronically or by mail. For payees who do not provide consent, or who withdraw their consent to receive the Form 1099-G electronically before the statement is furnished, the payer must provide a paper payee statement within the regular deadline. And again, that would be January 31 for the Form 1099-G. As a payer, you should have a record of the payee consent for every statement that you furnish electronically. If you fail to furnish the information in the required manner, this could result in the payee neglecting to report the income on their individual federal, state or local income tax returns. And this could subject them to enforcement actions, including penalties and possibly interest, by multiple government taxing authorities on any taxes that were due and owing. The affirmative consent requirement ensures that each payee will either receive the statement on paper, or agrees to the electronic delivery.

Now here are a few reminders. One, the recipient must not have withdrawn the consent before the statement is furnished. Two, if the recipient subsequently withdraws his or her consent, your system must notify you and a paper reporting requirement must be resumed. You must provide a paper payee statement within the regular deadline, and again that of course is January 31 for Form 1099-Gs. Three, remember, a new consent to receive the statement electronically is required after any new hardware or new software is put into service. And four, all electronic statements must be in a format that conforms to the requirements as stated in Publication 1179.