Since the award was reported on a W-2, I assume it was for back wages. What is the distinction between "the lump sum" and "the amount I won"? Do you mean that part of the amount you were awarded went to pay your lawyer? If so, the amount you actually won is the full amount of the award, not just what was left after you paid your lawyer. The full amount is taxable income. The fact that you used part of your award to pay your lawyer does not make it non-taxable. (Employment lawyers, and the people in the lawyer's office, are not necessarily tax experts.) You just enter the W-2 as it is in your tax return.
However, what was the lawsuit for? If it was for unlawful discrimination, you can claim an adjustment (or "above-the-line deduction") on your tax return for the lawyer's fee, which means you would not pay tax on the amount of the fee. Officially TurboTax does not support the adjustment for lawyer's fees for an unlawful discrimination claim. It's listed in the Unsupported Calculations document. Nevertheless, it can be entered in TurboTax for 2023, but only in forms mode. Forms mode is available only in the CD/Download TurboTax software, not in TurboTax Online, so there is no way to make the entry in TurboTax Online.
Here's how to enter the deduction for attorney fees for an unlawful discrimination claim in TurboTax for 2023. In forms mode open the "Form 1040 or Form 1040-SR Worksheet" (1040/1040SR Wks). Scroll down to the Schedule 1 section (Additional Income and Adjustments to Income), then to Part II Adjustments to Income, and then to the Other Adjustments to Income Smart Worksheet between lines 23 and 24. Enter the attorney fees on line K of the Smart Worksheet. The amount will then appear on Schedule 1 line 24h, and it will be deducted from the income on your Form 1040.
Refer to IRS Publication 525 for important additional information about this adjustment.
