Received a W2 and 1099-Misc for a settlement?

Forum|Forum|5 years ago
January 30, 2021
1 reply
2 views

Hey guys so I'm a bit confused. So my wife got a settlement from a class action lawsuit in 2020. All of the settlement was taxed. We received a W2 for the settlement that shows the taxes deducted. We also received a 1099-MISC for the same amount minus a penny. When I input the MISC form into turbo tax it takes a chunk of my refund away. It feels like I would be getting taxed twice on this amount. Any help would be great!!

ToddL99

Level 13

If the Form W-2 and the Form 1099-MISC both reported the same payments, then you will have to make an adjusting entry to prevent double-counting the income.

First, enter the W-2 in the Wages and Salaries interview of Federal Taxes > Wages and Income (or Personal Income). Enter it exactly as it was sent to you to ensure you get credit for the taxes withheld.

Then, enter the Form 1099-MISC in the Income from 1099-MISC interview in Wages and Income > Other Common Income.

Do NOT say the income was related to your work or career, that it involved an intent to make money or that it had been received in the past or expected in the future. Answering "Yes" to any of these questions will trigger self-employment taxes.

Finally, go to the  Other Reportable Income interview, the very last interview in Wages and Income  (Federal Taxes  >  Wages & Income >  Less Common Income  >  Miscellaneous Income ). (Or enter "other reportable income" in the Search Box and select "jump to other reportable income"). These payments are NOT wages).

 Enter the amount reported on the 1099-MISC as a negative number. This will cancel out the earlier 1099-MISC entry.

TwomonstersAuthor

Level 2

So I ended up deleting the return and starting over. So you are saying that I don't need to put in the MISC form into my return? I think that's what I get from you post, thanks for the help.

JohnB5677

Level 15

That is incorrect. You initially have to enter the 1099-MISC as income. That form is reported to the IRS and they will be looking for it to be posted. Todd gave you excellent directions on how to negative it out to become a net zero income.

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