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NJ RETURN - NON TAXABLE LAWSUIT SETTLEMENT 1099 MISC

NJ RETURN - NON TAXABLE LAWSUIT SETTLEMENT 1099 MISC
On June 4, 2019 at 3:41 PM - ChristinaR responded below with a federal return fix. While this worked for the federal return - it does NOT work when you import into a NJ state return - no one has since replied with a NJ state return fix. Is there one? Or must you paper file the NJ return?

FEDERAL FIX ONLY
Yes, your best course of action would be to get the 1099-MISC corrected, since the IRS will receive a copy and expect to see it on your return.
If you are not able to get a corrected form issued, an alternative would be to enter this 1099-MISC in TurboTax. The amount will be transferred to line 21 of your 1040. Then, to correct, you will navigate to:
• Personal Income tab (in the Home & Business program)
• Less Common Income Section
•Click Start next to Miscellanous Income 1099-A, 1099-C
•Click Start next to Other reportable income
You'll be asked Did you receive other reportable income? You'll answer yes. On the next screen, you will enter a negative amount equal to the amount reported on the 1099-MISC, along with an explanation in the Description box (e.g. Incorrect 1099-MISC received for personal injury settlement). This negative amount will then be transferred to line 21 of the 1040 and "zero out" the previously-reported 1099-MISC. This will result in the correct tax treatment, while also properly reporting the 1099-MISC.
You mentioned that the taxability was confirmed by your attorney, but please make sure that this was not an amount that represents punitive damages, as they are taxable, even if the punitive damages were received in a settlement for personal physical injuries or physical sickness.

6 Replies
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Level 11

NJ RETURN - NON TAXABLE LAWSUIT SETTLEMENT 1099 MISC

To make the adjustment for a nontaxable lawsuit settlement on your NJ return, please follow these steps:

  1. If you haven't yet completed the interview for your NJ return, you will come to a screen, Other Non-Wage Income
  2. The amount from the 1099-MISC you entered on your federal return should appear. 
  3. On the next line, enter a description and the amount of the settlement as a negative number.

 

  1. If you have already completed the NJ interview, go back into your NJ return.   
  2. On the screen:  You've Finished Your New Jersey Return, click the Update box next to Adjustments.
  3. Continue to the screen, Other Non-Wage Income, continue with steps 2 & 3 above.
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Returning Member

NJ RETURN - NON TAXABLE LAWSUIT SETTLEMENT 1099 MISC

I used the amount and negative amount techniques suggested on my FED and NJ return - it was REJECTED by my NJ STATE efile- what should I do now?????? 

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Employee Tax Expert

NJ RETURN - NON TAXABLE LAWSUIT SETTLEMENT 1099 MISC

What was the reason or reject code for the state return?

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Returning Member

NJ RETURN - NON TAXABLE LAWSUIT SETTLEMENT 1099 MISC

THERE WAS NO CODE: the Email reads as follows:

Your 2019 New Jersey Personal return was rejected

This happens from time to time, but we're here to help.

We'll walk you through updating and e-filing your return every step of the way.

What happened

/ReturnState/ReturnDataState/FormNJ1040/Body/Other/Amount - When entering other income even if you enter a zero the column for the New Jersey total must have a description value.

Next step

We'll help you update this on your 2019 New Jersey Personal return and e-file.

To update your return

Once you've opened your return in TurboTax, the details about what's causing the problem will be displayed.

From there we can walk you through making the updates you need and help you e-file your return. If we're unable to resolve the errors and e-file again, we'll help you get your return filed by mail.

 

I opened my return - but no such "walk-through" help provided

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Returning Member

NJ RETURN - NON TAXABLE LAWSUIT SETTLEMENT 1099 MISC

That's what I - I DID NOT WORK - state return REJECTED twicew - (even though program says no errors)

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Returning Member

NJ RETURN - NON TAXABLE LAWSUIT SETTLEMENT 1099 MISC

I used this recommendation before I e-filed and the software review said there were no errors in my NJ state return and the return was OK to e-file. But IT DID/DOES NOT WORK.  The TTAX program software error message says:

"When entering 'other income' for New Jersey, a description is required and the amount cannot be negative. Please go back and adjust your return accordingly before re-transmitting your return." 

If this is now the message from within TTAX program why are you recommending use of a negative number (which apparently results in REJECTED NJ returns) .

Also the program does not suggest how to "adjust your return." If you remove the offsetting negative entry, the program calculate taxes on the positive amount (which is incorrect because it is non-taxable). Also the software does not let you remove the positive entry (it apparently pulls it from the Federal return-which was accepted?) 

If I print and mail the state return wound I get rejected for the same reason?

HOW DO I FIX THIS MESS?