Qualified Attorney's Fees - Civil Rights Case

[TB122]

I followed JohnB5677 instructions "Where to deduct qualified attorney's fees" to enter a negative for the amount of my lawyer's fees that were paid in my civil rights case settlement but doing this it made my refund go way up.

Am I suppose to enter the same amount in a different area, only in the positive, so they cancel each other out? I did not receive a 1099 or any other form. I called my attorney, he apparently received a 1099 in his name only. I did fill out tax forms and sent them to him at the time of the case. Not sure what to do here. Thank you.

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/where-do-i-deduct-qualified-atto...

[KrisD15]

Attorney fees for SOME income may be deducted from the settlement, but if no attorney fees/settlement were reported as income, you would not make a deduction. 

[TB122]

Thank you for quick reply KrisD15. Ok, so, since I did not get a 1099, and it is only listed in my settlement agreement papers, and only he got the check. I do not report this anywhere, correct?

[MarilynG1]

Can you clarify; did you actually receive income from a legal settlement?

If so, here's how you report the income, on your tax return:

If you didn’t receive a 1099-MISC:

1. Sign in to TurboTax and open or continue your return.
2. Search for lawsuit settlement and select the Jump to link.
3. Answer Yes to the question Any Other Taxable Income?
   • If you've already entered miscellaneous income, select Add Another Miscellaneous Income Item.
4. Enter a brief description and the amount you received and select Continue.

You can subtract attorney's fees as you mentioned earlier.

Here's more info on Legal Settlements. 

@TB122 

[TB122]

Hi. Thank you. No, I do not believe I received "income."

The settlement called for several things. 1) for my wife's health insurance company to process and pay all claims impacted. 2) It also required the University to pay all my attorneys fees for my having to bring a suit.  3) It also required the University to reimburse me for all thousands of dollars I had to pay the hospital and providers that I was forced to pay when all the (pre-authorized, pre-approved) health claims were later (wrongly) denied by the third party claims administrator in violation of my civil rights. I did not receive any extra money "income," no pain and suffering, or windfall of any type. My attorney says he got a 1099 for his attorney's fees that he was paid and he would email me a copy and I should use his form. I said I did not think I could file his payment amount on my taxes because the 1099 is in his name. I have received no tax forms, no 1099-misc, nothing.

Given this information above, do I still follow your directions?

[MonikaK1 · Accepted solution]

If the terms of the settlement you received were limited to reimbursement of medical expenses and related attorney fees, then you wouldn't have any taxable income to report and nothing to deduct.

If you had taxable damages from a civil rights case, then you could deduct the portion of the settlement that represented attorney fees.

Whether a lawsuit settlement payout is taxable depends on what the settlement represents. If this is a refund of previously paid insurance premiums or medical expenses, then it is nontaxable unless the amount was previously deducted on your tax return.

See IRS Publication 4345 and this IRS article for more information about legal settlements.

[TB122 · Accepted solution]

Whether a lawsuit settlement payout is taxable depends on what the settlement represents.

I wasn't sure what this meant but now I finally understand. Yes, this was a refund of medical expenses already paid by me and no, I did not deduct the payments I made, as medical expenses on my taxes. Thank you so much for your time, care, and thoroughness.