If i received funds w/o a legal settlement or a 1099 form issued from an individual as reimbursement to copyright infringement damages where does it go on my tax return?

[jeffgardner2]

$6,047.70 received via PayPal

Individual outside of US.

No 1099 from them will be possible.

No legal settlement just came to an agreement via email exchanges.

[Opus 17]

If you are still in whatever business generated the copyrighted content (songwriter, author, artist, etc.) then this is regular schedule C business income like any other income from that activity.  You can enter business income without a 1099-MISC.

If you are no longer actively generating copyrighted content for self-employment, then royalties go on schedule E.  I'm not sure how to enter them in Turbotax for this year.  Presumably there is an interview section for royalties that will allow royalties with or without a 1099-MISC, but I don't know where it is in the program.

(Any legal settlement is taxed according to the character of the income it represents.)

[Carl]

Copyright infringement of what precisely? Intellectual property such as using a software program you own without having first licensed it through you or a third party agency that pays you a percentage of the licensing fee? Maybe someone plagerized something you wrote and wrongly took credit for it? Basically, I'm trying to understand just "exactly" why type of income this would be if there had been no infringement. Royalty income or what?

[jeffgardner2]

Thank you both very much for you responses.

Opus 17, This occurred in early 2018, the funds were paid a few months later and are satisfactory. The generated copyrighted content was used without authorization (stolen) from our own separately run business (“teacher-author” of digital pdf documents) that continues to operate.

Carl, If there had been no infringement then it would be a sole proprietor business income. It was plagiarism of digital pdf documents.

[Opus 17 · Accepted solution]

In that case, it is still sole prop business income. You can report income that does not come on a 1099 form.

[jeffgardner2]

Thank you, so much!
So under the Business Income section, where there is 1099-MISC Income, General Income, Income You Gave Back there is a line "Other Income" to put this $6K. The rest of my income would be in the General Income (1099-K) since this is where my normal business income is listed?

[Opus 17]

I don’t think it matters if it is general or other.   As long as it is on schedule C.  

[jeffgardner2]

Thank you for the quick response!
Since I use an online marketplace to sell my products, they issue a 1099-K so I always put that on the General Income (1099-K) line, just to match what is reported to the IRS.
Probably best to keep this separate on the "Other Income" line.

[Carl]

What you tell the program was on the 1099-K must match exactly what's on that 1099-K. You'll just report it as other income not reported to you on a 1099-MISC or K is all. In other words, it's the same as if I paid you in cash.

[Opus 17]

The Schedule C itself only has one line for gross income (line 1).  Everything goes there.  Turbotax asks about different kinds of income, partly because the IRS will be looking for your various 1099 forms.  If Turbotax asks you to separately enter your 1099-MISC and 1099-K forms, this income doesn't go there, it just goes with "other income not reported on a 1099" (or however the interview labels it.)

[jeffgardner2]

Ooh okay, I just re-read that part of interview. Yeah it does say "If you have income from sales or services that was not reported on forms 1099-MISC or 1099-G, enter it below. You can also use the fields below to enter income reported to you on Form(s) 1099-K."  This is under the one line of "General Income", which is under the "Business Income" section  on TurboTax 2018 which I see shows up on form Schedule C line 1a.
Does this seem like I understand it better? If so, then thank you both for steering me in the right direction! I certainly don't need any problems or questions.