Legal settlements that are taxable (including previously deducted medical expenses related to physical injury or illness) are entered as miscellaneous (other) income.
Interest earned on settlements is taxable income and should be entered as a Form 1099-INT.
If you received a 1099-MISC:
- Open or continue your return.
- Navigate to the 1099-MISC section:
- TurboTax Online/Mobile: Go to 1099-MISC.
- TurboTax Desktop: Search for 1099-misc and select the Jump to link.
- If you're asked Did you get a 1099-MISC?, answer Yes.
- If you've already entered a 1099-MISC, select Add another 1099-MISC.
- Enter the info from your 1099-MISC and select Continue.
- On the Describe the reason for this 1099-MISC screen, enter lawsuit settlement and select Continue.
- On the Does one of these uncommon situations apply? screen, select This was money from a lawsuit settlement and then answer the back wages question before selecting Continue.
TurboTax FAQ: Where do I enter an award from a taxable legal settlement?
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