An Arizona 1099-G is the tax form the state issues to report two kinds of government payments you received during the year: unemployment compensation from the Arizona Department of Economic Security (DES) and state income tax refunds from the Arizona Department of Revenue (ADOR). Both agencies make the form available by January 31, and the figures on it have to match what you put on your federal return.1Internal Revenue Service. Requirements for Furnishing Form 1099-G Electronically Ignoring the form or using the wrong numbers invites IRS notices and underpayment penalties.
What the Form Reports
Three boxes do almost all the work for Arizona filers:
- Box 1 shows the total unemployment benefits DES paid you during the calendar year, including federally funded extensions, as a single figure.2Internal Revenue Service. Form 1099-G – Certain Government Payments
- Box 2 shows refunds, credits, or offsets of Arizona income tax. ADOR only issues the form if the refund was $10 or more.3Internal Revenue Service. Instructions for Form 1099-G
- Box 4 shows any federal income tax that was withheld from your unemployment benefits. You’ll claim that amount as a credit on your federal return.
The form can also report taxable grants in Box 6 and Department of Agriculture payments in Box 7, but those boxes rarely matter for individual filers.4Internal Revenue Service. About Form 1099-G, Certain Government Payments
Getting Your 1099-G From DES
DES posts the form electronically through its CACTUS portal at uibenefits.az.gov. Log in and look under Unemployment Services, or check your message center.5Arizona Department of Economic Security. 1099-G Tax Forms The electronic copy is there even if you asked DES to mail you a paper version.
If you moved during the year and want a paper copy, update your mailing address in CACTUS before the end of December. A form that gets lost in the mail doesn’t excuse you from reporting the income, because the IRS already has its copy. If you can’t log in, you’ll have to run through the DES identity verification process to recover access.
Getting Your 1099-G From ADOR
ADOR runs a lookup tool at form1099g.aztaxes.gov where you can view the form online.6State of Arizona Department of Revenue. View 1099 Form – AZTaxes.gov The form is posted on or before January 31 each year.7State of Arizona Department of Revenue. View My 1099-G
Not every refund produces a form. ADOR issues a 1099-G for your Arizona refund only if you itemized deductions on your prior-year federal return. Took the standard deduction last year? No form, because the refund isn’t federally taxable to you.8Internal Revenue Service. 1099 Information Returns (All Other) If you itemized and still don’t see a form online, contact ADOR to confirm whether one was generated.
Reporting Unemployment on Your Federal Return
Unemployment compensation is fully taxable at the federal level. Report the Box 1 amount on Line 7 of Schedule 1 (Form 1040), Additional Income and Adjustments to Income.9Internal Revenue Service. Topic No. 418, Unemployment Compensation It flows into your adjusted gross income and is taxed at your ordinary rate. There is no special lower rate.
If DES withheld federal taxes, the amount in Box 4 goes on Line 25b of Form 1040.10Internal Revenue Service. 2025 Instructions for Form 1040 That reduces your tax owed dollar for dollar. Don’t skip it.
When a State Refund Is Taxable Federally
A refund shown in Box 2 is federally taxable only if deducting state taxes last year actually lowered your federal tax. That’s the tax benefit rule, codified at 26 U.S.C. § 111.11Office of the Law Revision Counsel. 26 USC 111 – Recovery of Tax Benefit Items If you deducted state income taxes on Schedule A and later got some back, the refund reverses part of that deduction.
If you took the standard deduction on your prior-year federal return, your Arizona refund is not taxable. You never got a federal benefit from the state taxes you paid, so there’s nothing to recapture.8Internal Revenue Service. 1099 Information Returns (All Other)
If you did itemize, the refund may be partly or fully taxable depending on how much benefit you actually got. If your itemized deductions only slightly exceeded the standard deduction, only the amount above the standard deduction threshold is taxable, not the whole refund. The SALT deduction cap also feeds into the math. For 2026, that cap is $40,400 for most filers, raised from the previous $10,000. Work through the State and Local Income Tax Refund Worksheet in the Schedule 1 instructions, or Worksheet 2 (Recoveries of Itemized Deductions) in IRS Publication 525, to find the taxable portion.12Internal Revenue Service. Publication 525 (2025), Taxable and Nontaxable Income Any taxable amount goes on Schedule 1. If the prior year involved Alternative Minimum Tax, the calculation gets harder, and a tax professional is worth the fee.
Reporting on Your Arizona Return
Arizona starts with your federal adjusted gross income, then applies its own additions and subtractions. All income is taxed at a flat 2.5% rate.13Arizona Department of Revenue. Individual Income Tax Highlights
A common mistake is treating unemployment benefits as exempt from Arizona tax. They are not. Arizona Revised Statutes § 43-1022 lists the allowed subtractions, and general unemployment benefits are not on the list. Social Security and certain railroad retirement and railroad unemployment payments qualify, but regular DES unemployment compensation is taxable in Arizona at the same 2.5% rate as the rest of your income. Don’t subtract it on Form 140 (or 140PY for part-year residents), or you’ll understate your tax and risk penalties.
A state refund in Box 2, on the other hand, is generally not taxable on your Arizona return. Arizona doesn’t allow a deduction for its own income tax, so there’s no prior benefit to recapture.
Arizona’s standard deduction for 2025 is $15,750 for single filers and $31,500 for married couples filing jointly.13Arizona Department of Revenue. Individual Income Tax Highlights If your total income including unemployment falls below the standard deduction, you may owe no Arizona tax even though the benefits are technically taxable.
Withholding and Estimated Payments
Unemployment benefits don’t have taxes withheld automatically the way a paycheck does. To avoid a shortfall in April, submit IRS Form W-4V (Voluntary Withholding Request) to DES. The federal withholding rate on unemployment compensation is a flat 10%, and no other percentage is allowed.14Internal Revenue Service. Form W-4V, Voluntary Withholding Request Check the unemployment box on line 5, sign, and give the form to DES, not the IRS. Withholding stays in place until you change it, stop it, or the benefits end.
DES may also offer its own withholding form. Either way, this is voluntary. If 10% won’t cover your bill, or you choose not to withhold at all, make quarterly estimated payments using IRS Form 1040-ES. Skipping both is where most unemployment recipients end up owing penalties.
Fixing an Incorrect 1099-G
If the amount on your 1099-G doesn’t match what you actually received, you need a corrected form from the agency that issued it. Filing with different numbers and hoping the IRS doesn’t catch it is not an option.
For unemployment errors, contact DES. Gather bank statements or payment records showing the actual deposits and submit them with your dispute. If DES confirms the error, it will issue a corrected form. The review can take several weeks, so start early. If a correction isn’t likely before April, file an extension while you wait.
For refund errors in Box 2, contact ADOR’s Taxpayer Assistance Unit. ADOR will match the figures against your prior-year return and its own payment records before issuing a corrected form.
A 1099-G for Benefits You Never Received
If a 1099-G shows unemployment benefits you never applied for or collected, someone likely filed a fraudulent claim under your name. This has been widespread since 2020, and the problem won’t resolve itself.
Report the fraud to DES through its online fraud referral form, including your Social Security number, full name as it appears on the documents, and the address where they arrived.15Arizona Department of Economic Security. Unemployment Insurance Benefit Fraud DES also recommends filing with the Federal Trade Commission at identitytheft.gov and with the National Center for Disaster Fraud.
On the federal side, complete IRS Form 14039 (Identity Theft Affidavit) and attach it to the back of a paper-filed return. Don’t include the phantom income on your return, but do file the 14039 so the IRS knows to disregard the fraudulent 1099-G.16Internal Revenue Service. How IRS ID Theft Victim Assistance Works You’ll have to paper-file rather than e-file. Request a corrected 1099-G from DES showing zero benefits paid, and keep every piece of correspondence documenting the fraud.