topic Class action lawsuit settlement from my IRA account in Retirement tax questions

Class action lawsuit settlement from my IRA account

jmkather — Tue, 24 Feb 2026 07:24:31 GMT

I received a class action lawsuit settlement check resultant from a security I had in my IRA account. The security has already been wiped from my account as worthless because the company declared bankruptcy in 2015. The check is not an insignificant amount of $$.

My question is:

Do I need to somehow put this money back into my IRA (not as a contribution) Or do I have to declare this money as a distribution on my taxes? I'd rather not take it as a distribution because it is a large sum.

Re: Class action lawsuit settlement from my IRA account

dmertz — Thu, 14 Sep 2023 10:39:51 GMT

The settlement needs to be deposited into the IRA as a restorative payment, not as a contribution, otherwise the amount needs to be treated as an IRA distribution. Contact the IRA custodian regarding restorative payments to the IRA.

Re: Class action lawsuit settlement from my IRA account

NCperson — Thu, 14 Sep 2023 02:46:21 GMT

@jmkather

<<Contact the IRS custodian>>

I think @dmertz meant IRA custodian 🙂

Re: Class action lawsuit settlement from my IRA account

dmertz — Thu, 14 Sep 2023 10:40:08 GMT

Corrected. Thanks.