Yes, 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:
- Click on Federal Taxes
-
Wages & Income > I'll choose what I work on.
-
Other Common Income section, click Show more
-
Form 1099-MISC, click on the Start/Update
- Did you get a 1099-MISC?, click Yes
- Let's get the info from your 1099-MISC, box 3 Other Income, click Continue
-
Describe the reason for this 1099-MISC, click Continue
- Select This was money from a lawsuit settlement on the Does one of these uncommon situations apply? screen and then answer the back wages question before clicking Continue.
