topic My wife won a lawsuit and was awarded $1900, but her attorneys receivd $103,000 for their fees. we were 1099'd for the $103,000 . how to reverse this to the atttorney? in Retirement tax questions

My wife won a lawsuit and was awarded $1900, but her attorneys receivd $103,000 for their fees. we were 1099'd for the $103,000 . how to reverse this to the atttorney?

Kam46 — Mon, 22 Mar 2021 14:22:00 GMT

Re: My wife won a lawsuit and was awarded $1900, but her attorneys receivd $103,000 for their fees. we were 1099'd for the $103,000 . how to reverse this to the atttorney?

TomD8 — Mon, 22 Mar 2021 19:39:09 GMT

Legal fees are considered gross income to the plaintiff. The concept is that you received the entire settlement, and then you paid the attorneys. You should enter the 1099 as is.

Unfortunately, most personal legal fees are not deductible. For an explanation of deductible and non-deductible legal fees, see Legal Expenses on Page 5 of this IRS Publication:

https://www.irs.gov/pub/irs-pdf/p529.pdf

Re: My wife won a lawsuit and was awarded $1900, but her attorneys receivd $103,000 for their fees. we were 1099'd for the $103,000 . how to reverse this to the atttorney?

Opus 17 — Mon, 22 Mar 2021 16:04:13 GMT

@TomD8 wrote:

Legal fees are considered gross income to the plaintiff. The concept is that you received the money, and then you paid the attorneys. You should enter the 1099 as is.

You may deduct the legal fees if certain criteria are met. See this previous TT answer for an explanation of deductible and non-deductible legal fees:

Are legal fees deductible? (intuit.com)

Tom, that answer no longer applies. Legal fees are not deductible on a federal tax return except for a lawsuit related to employment discrimination. (Fees may still be deductible at the state level.)

If the numbers here are not typos, and the plaintiff was awarded $105,000, with $103,000 going to the attorneys, then the entire $105,000 will be taxable to the plaintiff. I would make a complaint to the bar association, a 98% fee is unconscionable, and possible illegal, depending on state law.

Re: My wife won a lawsuit and was awarded $1900, but her attorneys receivd $103,000 for their fees. we were 1099'd for the $103,000 . how to reverse this to the atttorney?

TomD8 — Mon, 22 Mar 2021 19:15:28 GMT

@Opus 17 --

Thanks. I've edited my answer.