Why has form 1099-G disappeared?

There is a disappearing notice that used to be essential for most tax returns. It’s the form 1099-G from state governments that tells taxpayers if they had a state income tax refund in the prior tax year. This form still gets reported to the IRS, but few people ever see it, because state governments have stopped mailing it out in a cost-cutting measure.

If states are reporting income to the IRS on our behalf, why aren’t we being notified? The short answer is that the 2017 Tax Law not only made state tax payments less deductible by putting a limit on them, it also made itemized deductions much less common by raising the standard deduction. State tax refunds are only taxable if they reflect a tax deduction in the prior year, which rarely happens anymore.

If you are in the 5% who still itemize income tax deductions, knowing your state tax refund amount is still essential, and a complex calculation must be done to see if any of it could be taxable. The only way currently to get this lost form is to go on your state’s department of revenue site and look for form 1099-G. Though states no longer mail the form out, it should be available in their database for the current tax year.

For tax pros, making sure your client understands why state taxes are no longer deductible or taxable in most cases will help them understand why this form is no longer being sent. You can still impress your clients by downloading the form for them if you want to show them the complete picture of what the IRS sees.

Written by Dan Connors