Yes, punitive damages and awards or settlements for Emotional Distress or mental anguish not related to a physical injury or physical sickness must be included in your income on line 21 of Form 1040.
To enter your settlement payment in TurboTax take the following steps:
- Click on Federal Taxes
- Wages & Income or Income & Expenses
- Scroll down to Less Common Income and click Show More
- Click Start next to Miscellaneous Income, 1099-A, 1099-C, etc
- Scroll to the bottom and click Start next to Other Reportable Income
- Click Yes when it asks if you have "Any Other Taxable Income"
- Follow the interview questions to enter your settlement payment received.
For more information on Taxable settlements click on the following link
https://www.irs.gov/pub/irs-pdf/p4345.pdf
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