It depends.
If you have received this lawsuit money in 2016 and this amount is taxable, you must report the amount in your 2016 tax return, even if you only deposit the check in your account in 2017.
If you did not receive the check in 2016 but only in 2017, then you will report the amount in your 2017 tax return next year.
This is what the IRS calls constructive receipt. And the IRS has given some examples below:
Constructive receipt.
Income is constructively received
when an amount is credited to your account or made available to you
without restriction.
You do not need to have possession of it. If
you authorize someone to be your agent and receive income for you, you
are considered
to have received it when your agent receives
it. Income is not constructively received if your control of its receipt
is subject
to substantial restrictions or limitations.
Example.
You are a calendar year taxpayer. Your
bank credited, and made available, interest to your bank account in
December 2016.
You did not withdraw it or enter it
into your books until 2017. You must include the amount in gross income
for 2016, the
year you constructively received the
interest income.
You
cannot hold checks or postpone taking possession of similar property
from one tax year to another to postpone paying tax
on the income. You must report the income in
the year the property is received or made available to you without
restriction.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
