Legal settlements are taxable income, including interest & penalties, so enter the entire amount from Box 10.
Enter this 1099-MISC as follows:
- Sign in to TurboTax and open or continue your return.
- Search for 1099-misc and select the Jump to link.
- If you're asked Did you get a 1099-MISC?, answer Yes.
- If you've already entered a 1099-MISC, select Add Another 1099-MISC.
- Enter the information from your 1099-MISC and select Continue.
- On the Describe the reason for this 1099-MISC screen,
enter lawsuit settlement and select Continue.
- On the Does one of these uncommon situations apply? screen, select This was money from a lawsuit settlement and then answer the back wages question before selecting Continue.
The amount will be reported as Other Income on line 8 of Schedule 1 (Form 1040). You do not need to file Schedule C.
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