topic I won an EAJA settlement against the FAA. This award was to cover legal fees incured by me fighting the FAA. The FAA sent me a 1099 for this settlement. Is this taxable? in Retirement tax questions

I won an EAJA settlement against the FAA. This award was to cover legal fees incured by me fighting the FAA. The FAA sent me a 1099 for this settlement. Is this taxable?

three_meals_a_day — Wed, 05 Jun 2019 02:14:02 GMT

The legal proceedings took 4 years. In that time the legal fees were not deducted. The fees were directly related to protecting my job. Had I lost I would have been unable to work.

I paid my attorney hourly and directly. The EAJA settlement check was sent to me directly.

If this is considered income can I somehow deduct it?

I view this settlement from the FAA as a reimbursement.

FAA Federal Aviation Administration.

EAJA Equal Access to Justice Act

the person you should really ask is your attorney. the...

Anonymous — Wed, 05 Jun 2019 02:14:04 GMT

the person you should really ask is your attorney.

the following is from IRS pub 4345 which deals with the taxability of settlements.

"If you receive a settlement for personal physical injuries or physical sickness and did not take an itemized deduction for medical expenses related to the injury or sickness in prior years, the full amount is non-taxable. Do not include the settlement proceeds in your income."

the pub does not directly address recovery of legal fees. However, the above is somewhat akin to your situation.

if it were me, I would attach a supporting schedule for the other income line of the return

EAJA settlement $xxxxxx.xx

less legal fees paid and never deducted yyyyyy.yy (should not exceed above)

net $0.00

If you paid more in legal fees than you recovered, the excess could be deducted as a misc itemized deduction. as follows "legal fees for preservation of income in excess of settlement. $zzzzz.zz

Thank you for the comment Hackitoff. Unfortunately, the l...

i_forgot_my_logi — Wed, 05 Jun 2019 02:14:05 GMT

Thank you for the comment Hackitoff. Unfortunately, the legal proceedings took 4 years to conclude. The EAJA award came in year 5. Over that time the fees were never deducted as I couldn't itemize. So, would I be able to take the legal fee deduction even though I wouldn't be doing it in the year I paid the legal fees?

Unfortunately, my attorney has no idea. I don't think they win too many of these cases.