Retirement tax questions

Your settlement should be reported as "Other Income" on your return.  To enter this on your return, follow the instructions below:

  • Choose the Federal return and the Wages & Income tab
  • Scroll down to Less Common Income and Show more.
  • Choose Miscellaneous Income, 1099-A, 1099-C.
  • Choose Other Reportable Income and say Yes.
  • The screen says "Do not enter income reported on Form 1099-MISC"; this is where you will enter the description "Compensatory settlement" the amount you received, and who received it, if necessary.

To zero it out, you will do the same thing, but enter the description "Settlement not taxable" (as instructed by your attorney) and the amount as a negative number. 

A corresponding negative amount will be entered, and line 21 will be zero.