Already got my tax return for 2008 last year. A few days ago I got a letter from IRS saying I didn't file 1099g for my unemployment of that year resulting to me owing $1,500.00 what can I do about this?

Sorry, but unemployment compensation IS taxable income on both your federal and state tax return.

You will need to pay the back taxes to both the IRS and to the state of Georgia.

Unemployment benefits is taxable income.
In 2009 first $2400 of unemployment benefit is not taxable.