☰
✕
Sign In

Why sign in to the Community?

  • Submit a question
  • Check your notifications
Sign in to the Community or Sign in to TurboTax and start working on your taxes
New Member
posted Apr 16, 2023 11:11:50 AM

1099-NEC for settlement money

I was given a 1099-NEC for settlement of an employee lawsuit. This was not back pay or lost wages. From what we understand it looks like they should have given us a 1099-misc instead but this back and forth is very confusing. We attempted to enter the information in as a 1099-NEC and it keeps telling us to review it to add additional missing information which we don’t have. We have added all the information that was given to us into the form and since it is not self employment money either turbo tax says to review it or delete it because it is not sure where to place it. Any suggestions? 

0 1 233
1 Replies
Expert Alumni
Apr 16, 2023 11:57:47 AM

We do not know the nature of the lawsuit nor how much should be taxable or how much should be subject to self-employment income.  Your legal counsel may be helpful to you.

 

This TurboTax Help and this IRS Publication may give you insights into the settlement that you received.

 

If the legal settlement is taxable but self-employment income is not due, report the IRS form 1099-NEC as follows:

 

  • Down the left side of the screen, click Federal.
  • Down the left side of the screen, click Wages & Income.
  • Click Show more to the right of Other Common Income.
  • To the right of Form 1099-NEC, click the Start / Revisit button.
  • At the screen Does one of these uncommon situations apply to you, select This was money from a lawsuit settlement.
  • You will be asked whether any portion of the settlement was for back wages.
  • Click Continue.

The entry will be reported:

 

  • on line 8z of Schedule 1 of the Federal 1040 tax return, and 
  • on line 8 of the Federal 1040 tax return.

@MRCL