Covid-19 Essential Employee Premium Payments of $500 taxable?

That's probably another one that IRS is thinking about now that it's February.  It wouldn't be on a 1099-G, that's for tax refunds and unemployment.  And it wouldn't be on 1099-MISC because it's under $600.  

Taxable per the IRS (since it is payment for services): https://www.irs.gov/newsroom/frequently-asked-questions-for-states-and-local-governments-on-taxability-and-reporting-of-payments-from-coronavirus-state-and-local-fiscal-recovery-funds

You can do a web search for the specific State, such as:

https://canons.sog.unc.edu/2022/01/american-rescue-plan-act-coronavirus-state-and-local-fiscal-recovery-funds-final-rule-premium-pay-for-local-government-employees/

https://www.mass.gov/info-details/covid-19-essential-employee-premium-pay-program

IRS will figure out eventually that two things happened in Massachusetts last year, and their "Announcement" covers only one of them.  

Massachusetts gave back about 14% of the 2021 state income tax paid by residents, and that's subject to the rules on state income tax refunds.  Taxable, if there was a tax benefit from it.  Taxpayers who did not itemize, or who could not claim it because of the $10K SALT limit, can ignore it.  

But the "Essential Employee Premium Payments" were a different program.  It was enacted in late 2021, which may be why it fell through the IRS cracks.  Payments did not require that the recipient paid any state income tax, and they were means-tested so high-AGI residents did not qualify.  They did require earned income to be shown on the 2021 return, but everyone was considered essential.  This was not compensation for services, any more than state EIC programs are compensation for services.  So ignore it.  Unless you want to wait for IRS to get its act together.