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Lawsuit settlement question

fauxtoe21 — Sun, 25 Apr 2021 04:05:46 GMT

I got a settlement in a lawsuit pertaining to a photo that was wrongfully used. My lawyer worked on a 50% contingency basis. There were three defendants. My lawyer had the money paid to him and gave me my cut. One of the defendants sent me a 1099-Misc for the full amount they paid. I never received a 1099 from my lawyer or the other defendants for the rest of the money. Do I ask my lawyer for a 1099? Will it be in the full amount that was paid to him or just the money he sent me? I am confused and new to all this.

Re: Lawsuit settlement question - update

fauxtoe21 — Mon, 26 Apr 2021 21:57:45 GMT

I talked to my lawyer. He said he doesn't need to send me a 1099 because the money went through a trust account. He said he "was technically never in possession of the funds and it wasn't paid from me - it was paid by the Defendants and just routed through my escrow account. "

My question is: how do I report this on my taxes? Do I report the full amount or the amount I received? How do I report the one 1099 I did receive?

Please help!!

Re: Lawsuit settlement question - update

DawnC — Mon, 26 Apr 2021 22:15:46 GMT

You need to report the full amount that you received. You can enter the 1099 that you received and enter the remainder of what you received as other income. The 1099 will also get reported on the same line as the other income. The total should be the total of what you actually received in the lawsuit. The link below gives instructions for reporting both pieces.

Where do I enter an award from a taxable legal settlement?

Re: Lawsuit settlement question - update

fauxtoe21 — Mon, 26 Apr 2021 22:23:49 GMT

Thank you!

The one 1099 I did receive was for the full amount not subtracting what my lawyer got. So, do I take that full amount and add it to whatever adds up to the total amount I got? Example: Say total amount I received from the suit was $15K. The 1099 was for $5K. Do I just add $10K to that and report it?

Thanks again!

Re: Lawsuit settlement question - update

ToddL99 — Mon, 26 Apr 2021 23:02:32 GMT

Please clarify:

You said the 1099 you received showed the "full amount not subtracting what your lawyer got". Then you said the 1099 only reported the $5K you received. Which is it?

Re: Lawsuit settlement question - update

fauxtoe21 — Mon, 26 Apr 2021 23:11:55 GMT

Okay.

There were three defendants.

All money was paid through my lawyer.

For some reason I was sent a 1099 from one of the defendants for the full amount that they paid. Nothing else from my lawyer or other defendants.

I didn't want to put the real amount I was paid in the example but here it is:

Total award was 50K. I was paid through my lawyer, minus some legal fees $24,234. The one 1099 I received was for the full amount that they paid to through my lawyer, $10K.

So do I report that full amount , 10K plus the difference of $14,234 to total what I actually received? Or do I report the 10k, minus what my lawyer took and then report $19,234?

Re: Lawsuit settlement question - update

ToddL99 — Mon, 26 Apr 2021 23:30:31 GMT

Still a bit confused - how many 1099s did you receive?

"I was sent a 1099 from one of the defendants for the full amount that they paid" Was that for $50K?

Then you said "The one 1099 I received was for the full amount that they paid to through my lawyer, $10K."

Re: Lawsuit settlement question - update

fauxtoe21 — Mon, 26 Apr 2021 23:34:14 GMT

I got one 1099 from one of the three defendants. That amount was for 10k. My total award was 50k from all three defendants, of which I received through my lawyer, $24,234.50 after he took his cut and fees.

Re: Lawsuit settlement question - update

fauxtoe21 — Mon, 26 Apr 2021 23:36:07 GMT

The break down for the three defendants were 10K, 10K and 30K.

Re: Lawsuit settlement question - update

ToddL99 — Mon, 26 Apr 2021 23:51:21 GMT

Report the 1099-MISC just as you received it - showing $10,000 of income. See Where do I enter an award from a taxable legal settlement? for instructions.

Report the balance of your net proceeds, $14,235, as "other Reportable Income".

Type "other reportable income" in the search window (or in the Search Topic window for desktop versions)
Click on "jump to other reportable income" (or "other reportable income" in the Search Topic results)
Answer "No" to "Did you receive any other wages?"
Select "Other reportable income" from the Miscellaneous income list
Select Add another Income item on the Other Miscellaneous Income Summary screen
Enter a Description (Lawsuit settlement) and amount ($14,235), then click on Continue

This income will appear on Line 8, of Schedule 1 and Form 1040.

Re: Lawsuit settlement question - update

fauxtoe21 — Mon, 26 Apr 2021 23:54:17 GMT

Thank you! I've never had a lawsuit before and it's all so confusing.