During the pandemic, the DeWine administration has asked all agencies, including the Ohio Bureau of Workers’ Compensation (BWC), to do everything they can to ease the financial pressures that businesses in the state are facing. BWC subsequently issued three rounds of “dividend checks” in 2020, most recently $5 billion in December, money which OSCPA has just learned could potentially be subject to the income tax and CAT. As a result, BWC will be mailing the IRS Form 1099-G to businesses.
BWC has stated, “BWC is compelled to issue the 1099-G according to IRS regulations. BWC has no discretion in this matter. BWC makes no representation to the IRS or individual employers as to whether or not the dividend payments are taxable. Each employers’ facts and circumstances are different. BWC did not issue 1009s for past rebates and dividends as it was not compelled to do so. BWC takes no position on whether or not those payments were taxable.”
Over the years, BWC has referred to these refund payments as either “rebates” or “dividends.” However, the terminology used does not affect whether or not the payments are taxable. It is the substance of the transaction that needs to be considered, not the name. BWC has shared that the income will be reported in box 6, taxable grants, on the 1099-G.
The amount reported on the 1099-G will be for the aggregate amount of all three BWC payments received in the calendar year 2020. According to BWC, the forms will be mailed to employers in March 2021 at the latest and BWC will make every effort to issue them as soon as it is possible to do so – they are still in the process of collecting W-9s from employers. OSCPA shared tax practitioners in most cases will likely need this 1099-G information by the normal end of January deadline, and BWC said employers in the alternative could just add up the payments they received from BWC in 2020.
Early feedback from the Ohio Department of Taxation (ODT) indicates these BWC payments also will be subject to commercial activity tax (CAT) liability because they are considered taxable gross receipts since no statutory exclusion applies in R.C. 5751.01(F)(2) to the amounts received.
Many Ohioans are also about to receive a 1099-G tax form in the mail stating that they received unemployment benefits in 2020 when, in fact, they did not.
The Ohio Department of Job and Family Services (ODJFS) this month is issuing 1.7 million 1099-G tax forms because of a federal law that requires reporting of unemployment benefits. If you get one but did not apply for unemployment, that is a major red flag that you might be the victim of identity theft.
Those who think their identity was stolen and used to file a fraudulent unemployment claim should visit unemployment.ohio.gov, click on the “Report Identity Theft” button, and complete the reporting form. ODJFS will issue confirmation emails to everyone who files a report with information about identity theft and protection. The agency will process the reports, conduct investigations and, if necessary, issue corrections to the IRS.