@TomD8 wrote:
Legal fees are considered gross income to the plaintiff. The concept is that you received the money, and then you paid the attorneys. You should enter the 1099 as is.
You may deduct the legal fees if certain criteria are met. See this previous TT answer for an explanation of deductible and non-deductible legal fees:
Are legal fees deductible? (intuit.com)
Tom, that answer no longer applies. Legal fees are not deductible on a federal tax return except for a lawsuit related to employment discrimination. (Fees may still be deductible at the state level.)
If the numbers here are not typos, and the plaintiff was awarded $105,000, with $103,000 going to the attorneys, then the entire $105,000 will be taxable to the plaintiff. I would make a complaint to the bar association, a 98% fee is unconscionable, and possible illegal, depending on state law.
