[Edited: This is business damages, not personal damages. Legal expenses are a deductible business expense.]
The lawyer is wrong. You report the gross settlement as income. Prior to 2018, the legal expenses were an itemized deduction subject to the 2% rule, but that deduction was eliminated. The only exception is for recoveries for unlawful discrimination (age, sex, race, etc.).
The definition of unlawful discrimination is very broad, and depends on both federal and state law. If you think your claim might involve unlawful discrimination, check with your attorney. https://www.americanbar.org/groups/business_law/resources/business-law-today/2022-april/tax-write-of...
If this is a UDC case, you report the entire gross amount as income, and then you need to make a manual entry in Turbotax to take the deduction. To make a manual entry, you must be using the program installed on your own computer from a CD or download, the manual entry can't be made in Turbotax online.
If this is not a UDC case, then the entire gross amount is taxable, sorry. Report it as "other" or miscellaneous income. Although this would have been self-employment income on schedule C, and subject to self-employment tax if you earned it in the course of working, I don't believe the settlement is or should be subject to SE tax, so I would not report it on schedule C, just as other miscellaneous income.
