Re: Lawsuit Settlement with 1099 MISC
Anonymous
Not applicable

Get your taxes done using TurboTax

if the suit is not related to the plaintiff's trade or business, there may be no write-off for legal fees or costs. That means you are taxed on 100% of your recovery. Examples of settlements facing tax on 100% include recoveries:

From a website for invasion of privacy or defamation;
From a stock broker or financial adviser for bad investment advice, unless you can capitalize your legal fees;
From your ex-spouse for claims related to your divorce or children;
From a neighbor for trespassing, encroachment, etc;
From the police for wrongful arrest or imprisonment;
From anyone for intentional infliction of emotional distress;

 

thus the taxes on the $8000 could exceed the $1000 you netted.    did the attorney explain this to you? 

 

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