No, the software is not glitched. You are required to report the amount of the money used to pay the attorney even though it didn't actually come into you hands. It is part of the award you received regardless of your payment for attorney fees.
- Treatment of Payments to Attorneys - IRC 6041 and 6045 state that when a payor makes a payment to an attorney for an award of attorney's fees in a settlement awarding a payment that is includable in the plaintiff income, the payor must report the attorney's fees on separate information returns with the attorney and the plaintiff as payees. Therefore, Forms 1099-MISC and Forms W-2, as appropriate, must be filed and furnished with the plaintiff and the attorney as payee when attorney's fees are paid pursuant to a settlement agreement that provides for payments includable in the claimant's income, even though only one check may be issued for the attorney's fees. Click the link above for more information.
- Can I deduct legal fees on my taxes? Review the information here to see if you qualify for any deduction of those fees. Typically it's only if it's for business use.
@Taxed2026
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