The short answer
| What it reports | Unemployment compensation, state and local income tax refunds, agricultural payments, and taxable grants. |
|---|---|
| Amounts to report | $10 or more for refunds and unemployment |
| To the recipient | January 31 |
| To the IRS, on paper | February 28 |
| To the IRS, electronically | March 31 |
If one arrives
A state refund is taxable only if you deducted state tax and got a benefit from it. Unemployment compensation is taxable and usually has nothing withheld.
The form is how a payer tells the IRS what it paid. Its absence is not permission — income you received is reportable whether or not a form covers it, and a threshold decides only who must file, never what you owe.
Who sends it
The payer is a government, never a customer. The instructions say it is filed "as a unit of a federal, state, or local government" that paid unemployment compensation, state or local income tax refunds, family leave benefits, Reemployment Trade Adjustment Assistance, taxable grants or agricultural payments. Pay from a government for your services is different: the instructions send it to Form 1099-NEC or Form 1099-MISC, like anyone else's.
The boxes
| Box | What it reports |
|---|---|
| 1 | Unemployment compensation, from $10 |
| 2 | State or local income tax refunds, credits or offsets, from $10 |
| 3 | The tax year of the box 2 refund, if it is not the current year |
| 4 | Federal income tax withheld |
| 5 | Reemployment Trade Adjustment Assistance payments |
| 6 | Taxable grants |
| 7 | USDA agricultural subsidy payments |
| 8 | A checkbox: the box 2 refund is of a tax on business income only |
| 10 | Family leave benefits from a state paid family and medical leave program (new) |
| 11a–12 | State information |
Box 10 is new, and the state information boxes that were numbered 10a to 11 are now 11a to 12. Not every box is covered here.
Unemployment compensation: box 1
Unemployment compensation is taxable and goes on Schedule 1, line 7. Box 1 is the total "before any income tax was withheld," and tax is withheld only when you ask for it. If you repaid an overpayment in the same year, you subtract it and report the difference.
A state tax refund: box 2
A refund of state income tax is income only if the tax gave you a federal benefit the year you paid it. If you took the standard deduction that year, none of it is taxable. The state knows this too: it does not have to send you a copy when it can tell you did not itemise, although it still reports the refund to the IRS.
A refund of a tax that applies only to business income is different, and box 8 marks it. The instructions give the example of "a tax on the net taxable income of an unincorporated business," and for that kind of tax the state must send you the form in every case.
Taxable grants: box 6
A grant to your business from a state or local program is ordinarily taxable, and a federal one usually is too. The form reports the amount but does not say which line of your return it belongs on, and that depends on what the grant was for. A state grant to your business is income works through it.
Agricultural payments: box 7
USDA agricultural subsidy payments, "including market facilitation program payments," are reported here. On a farm return they go on Schedule F, line 4a, as agricultural program payments.
Common questions
Is my state tax refund in box 2 taxable?
Box 1 shows more unemployment than I was paid. What do I report?
My business received a state grant. Is it taxable?
Was tax withheld from my unemployment?
What does the box 8 checkbox mean?
This page is for educational purposes only and does not constitute tax, legal, or financial advice. It covers United States federal reporting. Consult a qualified tax professional about your situation.