Get your taxes done using TurboTax

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 in TurboTax:

1. Click on Federal Taxes > Wages & Income  [In TT Self-Employed:  Personal > Personal Income].
2. Scroll down to the Other Common Income section and click on the Start/Update box next to Income from Form 1099-Misc. [See Screenshot #1, below.]
   
3. If you previously entered a 1099-Misc. in your return, you will be brought to the 1099-Misc Summary page.  Click on the Add Another 1099-Misc. box to add a new form [or Edit to change an existing form].  [Screenshot #2]
4. If you haven't already entered a 1099-Misc, answer Yes to the question Did you get a 1099-MISC? (even if you didn't get one).
5. On the Let's get the info from your 1099-MISC screen, complete the top part and then enter the award amount in Box 3 Other Income. [Screenshot #3]
   
6. Fill out any other boxes from your paper 1099-MISC (if you have one), then click Continue.
7. Enter a reason for the 1099-Misc. [Screenshot #4]
   
8. On the screen, Does one of these uncommon situations apply? select This was money from a lawsuit settlement  and then answer the back wages question before clicking Continue.  [Screenshot #5]