This is taxable income that would be reported as Other Income as long as the settlement did not involve wages or back pay. To report this in TurboTax:
- Open or continue your return
- Select the magnifying glass and search for 1099-misc. Select the Jump-to link
- Answer Yes to Did you get a 1099-MISC?
- Enter the info from your form into the corresponding boxes
- Enter Lawsuit Settlement under Describe the reason for this 1099-MISC
- Select This was money from a lawsuit settlement under Does one of these uncommon situations apply?
- Answer No. to Was any part of the lawsuit settlement for back wages?
You will then want to report your IRA contribution in a different section. If this is a traditional IRA and you are within the income limits, this will deduct the same amount from your taxable income and will be a wash. To enter this:
- Go to the Federal > Deductions & Credits > Retirement and Investments > Traditional and Roth IRA Contributions
- Continue through the interview
