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Level 2
February 18, 2026
Question

Deducting Attorney Fee Against Employer for a Title VII Unlawful Discrimination Settlement (with a caveat)

  • February 18, 2026
  • 1 reply
  • 58 views

I’m seeking advice on how to report an unlawful employee discrimination settlement against my employer under Title VII which I received in tax year 2025. There is a minor caveat.

I received an out of court employment discrimination settlement which I had filed against my employer with the EEOC, and I also hired a private attorney to represent me. The orgin of the complaint is unlawful discrimination under Title VII. My attorney worked with the EEOC, and my employer decided to settle for $900,000 which I agreed. My attorney fee was $270,000. My employer paid the attorney directly the $270,000 attorney fee and then the employer gave me a physical check for the balance directly (which was $630,000.)

I expected to receive a 1099-MISC from my employer for the entire $900,000 settlement. I was going to enter that 1099-MISC as is (which would get assigned as other income in turbo tax.) I was then going to deduct the $270,000 attorney fee on schedule 1 line 24-h as a “Qualified attorney fees paid after 10/22/04 for unlawful discrimination.”

The employer instead sent me a 1099-MISC only for the amount they paid me directly, which was $630,000. They did not include the amount of $270.000 which they paid directly to the attorney.

With this situation, I believe it may be correct to enter the 1099-MISC for $630,000 as reported (which will be assigned as other income in turbo tax), then enter the $270,000 attorney fee that was paid directly to the attorney as prizes and awards (on schedule 1 line 8-i), then show an adjustment in the amount of $270,000 for the attorney fee on Schedule 1 line 24-h. In this way, I am reporting the entire amount of the settlement as required by the IRS.

Does this seem correct?

    1 reply

    Level 15
    February 18, 2026

    Since the 1099-MISC is only for $630,000 I believe you would be fine just reporting that.  That will agree with IRS records.  If you want to report the entire $900,000 what you described is correct, although it has significant amounts not reported to the IRS that could draw attention.  Two ways of getting to the same result.    

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