If you were going to report the amount as if you received a Form 1099-R, you could prepare a substitute form in TurboTax.
Here are the steps:
In TurboTax online,
- Sign in to your account and select Pick up where you left off
- At the right upper corner, type in 1099r, then Enter
- Select Jump to 1099r
- Follow prompts
- Next screen, Choose your bank or brokerage, select I'll type it in myself
- Follow prompts. On the screen "Tell us if any of these uncommon situations apply"
- Check the box I need to prepare a substitute 1099-R and follow the prompts.
However, if the amount you received constitutes damages rather than a retirement distribution, then follow the terms of the settlement. Compensatory damages might not be taxable but punitive damages are normally taxable.
For more information, see this help article.
See also IRS Publication 4345 for more information.
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