No, you do not have to pay tax on the insurance payment you received for a wrecked car. However, since the payment was reported on a Form K-1, you will have to report it on your tax return. To do so, while in your tax return:
- Click on the Search Icon - Magnifying Glass
- Type in "1099-k"
- Click on "Jump to 1099-k"
- On the screen with "Did you get a 1099-K?" Answer Yes
- On the next screen with "How would you like to upload your 1099-K?" Click on "Type it in myself".
- For "Which type of income is your 1099-K for?" Indicate "Other".
- Enter the information on your 1099-K
- Below Box 1a, check the box for "This amount in box 1a is too high or includes some personal transactions."
- For the box "Enter the amount that shouldn't be included", enter the same amount that is in Box 1a.
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