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Get your taxes done using TurboTax
@vmmiller77 wrote:
If I report the $500 this year and then the 1099 for next year also includes the $500 I would be paying tax on that amount twice, wouldn't I?
Yes, in that scenario you would be paying tax twice on the $500 that you received in 2024. That's why I recommended not reporting it on your 2024 tax return.
You got two different answers because we are making different assumptions about the 1099-MISC for 2025. @DianeW777 gave you the answer that is strictly correct legally. She is assuming that the 1099-MISC for 2025 will not include the $500 that was paid in 2024. She thinks that the settlement administrator will know that they should not include it, or that you will be able to convince them to not include it. But the information you have from the settlement administrator is not clear about what the 1099-MISC will include. If the 1099-MISC for 2025 will include the $500 payment, you should not report the $500 in 2024, even though omitting it is not strictly correct. I recommended not reporting the $500 in 2024, based on the assumption that your expectation of what will be on the 1099-MISC is correct. But you don't really know.
You said you have contacted the settlement administrator for clarification. I suggest that you wait to file your 2024 tax return until you get an answer from them. Then you can decide which recommendation to follow, based on their answer.