Whether and how much of the amount of a legal settlement is taxable depends on the type of settlement proceeds you received and what they represented; you would need to determine this in order to know whether and where to report it in TurboTax since you don't have a tax document with an EIN.
Check the terms of the legal settlement. If you received punitive damages, this would be taxable income.
Property settlements that compensate for a loss in value of your property that are less than the adjusted basis of your property are not taxable and generally do not need to be reported on your tax return. However, you must reduce your basis in the property by the amount of the settlement. If the property settlement exceeds your adjusted basis in the property, the excess is income.
See this help article for instructions for entering a legal settlement in TurboTax. If you didn’t receive a 1099-MISC:
- Open or continue your return.
- Navigate to the lawsuit settlement section:
- TurboTax Online/Mobile: Go to lawsuit settlement.
- TurboTax Desktop: Search for lawsuit settlement and select the Jump to link.
- Answer Yes to the question Any Other Taxable Income?
- If you've already entered miscellaneous income, select Add Another Miscellaneous Income Item.
- Enter a brief description and the amount you received and select Continue.
See IRS Publication 4345 for more information about legal settlements.
Legal fees related to personal issues typically can't be included in your itemized deductions under current law. See this tax tips article for more information.
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