You should have received a 1099-MISC from the attorney.
Please enter that under "Income"
Other Common Income
Income from Form 1099-MISC
Be sure to select "This was money from a lawsuit settlement" on the "Does one of these uncommon situations apply?" screen
No, that is not completely true. The settlement will be free from Self-Employment tax (or FICA TAX) but will be taxable income as far as Income tax is concerned.
Additionally, unless the lawsuit is related to your business, the attorney fees cannot be deducted.
Yep, you pay tax on the income your attorney took.
According to the IRS:
"Generally, individuals, as cash basis taxpayers, may deduct attorneys‟ fees in the year they are paid, assuming the attorneys‟ fees otherwise qualify as deductible"
This means, if they are allowed to be deducted, you can deduct them.
But they aren't, unless you are Self-Employed.
(There was a time when a Taxpayer could possible deduct these fees, but not for tax year 2021)
IRS LINK
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