topic 1099R from Litigation Settlement Fund in Retirement tax questions

1099R from Litigation Settlement Fund

Lila18 — Wed, 31 Mar 2021 20:04:32 GMT

This is a 60 year old receiving a settlement amount from Litigation Settlement Fund on a 1099-r, Fed income tax withheld. Question is why is this taxable? Listed as normal distribution (7). Client needs clarification. Thanks

Re: 1099R from Litigation Settlement Fund

ThomasM125 — Wed, 31 Mar 2021 20:21:04 GMT

In general, litigation settlement proceeds stem from income that would have been taxable if you had not had to sue for it. So, in essence, you are receiving income that you should have received anyway, and if the income would have been taxable if not associated with the lawsuit, it will be taxable when you receive it because of the lawsuit.

Without knowing more about what the lawsuit was for, I cannot be more specific.

Re: 1099R from Litigation Settlement Fund

Lila18 — Wed, 31 Mar 2021 22:15:34 GMT

Thanks Thomas.... Also can you tell me where I need to report #7 Foreign tax paid on 1099 DIV 14.15?

Re: 1099R from Litigation Settlement Fund

ThomasM125 — Wed, 31 Mar 2021 22:48:06 GMT

When you enter your form 1099-DIV, you will see an option that says My form has info in more than just these boxes , when you click that box you will see the entry box for #7, foreign tax paid as follows: