The taxable amounts received will depend on how the lawsuit proceeds were labeled. If the proceeds were given solely to compensate you for property damage, that is not taxable income and you will enter the amount on line 21 of your return and then take it out as a negative to show the IRS. If part was DESIGNATED as attorneys fees those are taxable
To enter the proceeds, if they are taxable, you will enter them in the Miscellaneous income section.
- Click Federal Taxes tab (Personal in Home & Business)
- Select Wages & Income
- Scroll Down to Miscellaneous Income
- Click Start or Update
- On the next screen, scroll down and click Start next to Other Taxable Income
- Answer the questions regarding the settlement.
- When the software asks for the amount, enter the number with the minus sign before the amount as shown in the image below.
