What Is a 1099-G for Paid Family Leave and When Do You Need It?

A 1099-G form is commonly associated with government payments, including tax refunds and unemployment benefits. However, it can also apply to paid family leave in certain cases. If you received benefits under a state-sponsored paid family leave program, you might get this form for tax reporting.

Situations Requiring a 1099-G

A 1099-G is issued when a government agency provides taxable benefits, including certain types of paid family leave. Whether you receive this form depends on how the benefits were funded and distributed. In states where paid family leave is administered through a government program rather than a private insurer, the payments may be considered taxable income at the federal level. This applies in states like California, New Jersey, and New York, where paid family leave is funded through payroll taxes and disbursed by state agencies.

The taxability of these benefits depends on whether contributions were made with pre-tax or after-tax dollars. If payroll deductions were pre-tax, the benefits are generally taxable, and the state agency will issue a 1099-G. If contributions were made with after-tax dollars, the benefits may not be taxable, and a 1099-G may not be issued.

Some states withhold federal income tax from paid family leave benefits, while others allow recipients to opt in. If taxes were withheld, this will be reflected in Box 4 of the 1099-G. If no tax was withheld, recipients may need to make estimated tax payments to avoid penalties.

Differences Between 1099-G and 1099-MISC

Both forms report income to the IRS but serve different purposes. A 1099-G is issued by government agencies for taxable benefits such as state tax refunds, unemployment compensation, and certain public assistance payments.

A 1099-MISC, in contrast, is used for miscellaneous income that does not fall under wages, salaries, or self-employment earnings. It is commonly issued to independent contractors, landlords receiving rental income, and individuals awarded prizes or legal settlements. Unlike a 1099-G, which strictly reports government-issued payments, a 1099-MISC covers a broader range of income sources, including royalties exceeding $10 and service payments over $600 that do not require a 1099-NEC.

The tax treatment of income reported on these forms also differs. Payments on a 1099-MISC are often subject to self-employment tax if they represent earnings from a trade or business. In contrast, amounts reported on a 1099-G may be subject to federal income tax but are not typically subject to self-employment tax. For example, unemployment benefits reported on a 1099-G must be included in taxable income but do not require self-employment tax. Meanwhile, a freelancer receiving income on a 1099-MISC must pay both income tax and self-employment tax, which includes Social Security and Medicare contributions.

Reporting Requirements for Paid Family Leave

When receiving paid family leave benefits, accurately reporting them on your tax return is necessary to avoid discrepancies that could trigger an IRS notice. If a state agency provided the payments, the total amount will typically appear on a 1099-G and must be included as taxable income on your federal return. The IRS cross-references reported income with tax documents issued by government entities, so failing to report this amount can lead to penalties and interest charges.

For those who opted to have federal income tax withheld, the withheld amount will be listed on the 1099-G and should be entered on Form 1040 in the designated section for federal tax payments. If no tax was withheld, recipients might need to make estimated payments using Form 1040-ES to avoid an unexpected balance due at tax time. Since these benefits do not automatically have Social Security or Medicare taxes deducted, they do not count toward Social Security earnings, which could impact future benefits.

The taxability of paid family leave benefits can also vary at the state level. Some states follow federal tax treatment, while others exempt these payments from state income taxes. For example, California excludes paid family leave benefits from state taxable income, while New York includes them. Checking state-specific rules ensures accurate reporting and avoids unnecessary tax liabilities.

Handling Overpayments or Refunds

Receiving more paid family leave benefits than you were entitled to can create tax complications, particularly if the overpayment is identified after you have already filed your return. State agencies may request repayment or offset future benefits to recover the discrepancy. If you repay the overpaid amount within the same tax year, you can typically adjust it against your reported income. However, if the repayment occurs in a subsequent year, you may need to claim a deduction or credit under the “Claim of Right” doctrine outlined in IRS Publication 525.

The tax treatment of repaid benefits depends on the amount and timing. If the overpayment was less than $3,000, you could previously deduct it as a miscellaneous itemized deduction, subject to the 2% adjusted gross income (AGI) limitation before 2018. However, following the Tax Cuts and Jobs Act (TCJA), miscellaneous itemized deductions were suspended through 2025, making this option unavailable. For amounts exceeding $3,000, you may be eligible for a tax credit under IRC Section 1341, which allows a recalculation of prior-year tax liability to determine if a refund is due.

Common Questions About 1099-G for Paid Family Leave

Many taxpayers receiving a 1099-G for paid family leave have concerns about how it affects their tax situation. Misunderstanding the implications can lead to filing errors or unexpected tax liabilities.

A common question is whether the income is taxable at both the federal and state levels. While the IRS generally considers these benefits taxable if funded with pre-tax dollars, state tax treatment varies. For example, Rhode Island and California exclude paid family leave from state taxable income, while New York includes it. Checking state-specific tax laws is necessary to determine whether additional reporting is required.

Another frequent concern is whether these benefits impact eligibility for tax credits like the Earned Income Tax Credit (EITC). Since paid family leave is not considered earned income, it does not count toward EITC eligibility, which could reduce the credit for some taxpayers.

If a taxpayer did not receive a 1099-G but believes they should have, contacting the state agency that issued the payments is the best course of action. Failing to report income that should have been documented on a 1099-G can lead to IRS notices or penalties. If a 1099-G contains incorrect information, such as an overstated benefit amount, requesting a corrected form from the issuing agency is necessary before filing. Keeping detailed records of payments received, tax withholdings, and any repayments made ensures accurate reporting and prevents discrepancies that could delay processing or trigger an audit.