“I am currently unemployed and I get the benefits. I referred business to someone. They have offered to pay me $1000 as referral fee and they said they will issue a 1099. Will this affect my unemployment?”==========> I guess so; It will lower your unemployment payments by a formula your state uses, or if you make too much, will eliminate them.you need to give the unemployment office the income info on 1099; if you are caught you will have to pay back the unemployment plus penalties. The 1099 gets reported to the IRS by the payer as does your unemployment benefits.If you don't report the 1099 income, the office will find out later during an audit and you'll have to repay the money anyway.This will cause a real mess with your taxes. How will they find out" indicates you are considering just committing fraud; penalties can be severe for that. There are lots of ways they can find out.