Legal settlements are reported as "Other Taxable Income."You may or may not receive a 1099-MISC reporting the income. Regardless, this is how you should enter it:
Legal settlements are reported as "Other Taxable Income." You may or may not receive a 1099-MISC reporting the income. Regardless, this is how you should enter it:
• Select Federal Taxes
• Select Wages and Income
• Scroll down and select Show More at Other Common Income
• Select Start/Update next to Income from Form 1099-Misc.
• Answer Yes to the question Did you get a 1099-MISC? (even if you didn't get one).
• Complete the top part and then enter the award amount
• Enter a reason for the 1099-Misc.
• Select "This was money from a lawsuit settlement" on the "Does one of these uncommon situations apply?" screen
Interest earned on a lawsuit settlements is taxable income and should be entered as a Form 1099-INT. Punitive damages are taxable and should be reported as “Other Income” on line 21 of Form 1040, even if the punitive damages were received in a settlement for personal physical injuries or physical sickness.
See IRS Publication 4345 for more information.
https://www.irs.gov/pub/irs-pdf/p4345.pdf
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
