1099-MISC for Damages

Forum|Forum|7 years ago
June 5, 2019
1 reply
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I received a 1099-MISC from our local city, in California, for settlement of damages, ~$850.00, caused to our vehicle due to poor road maintenance and workmanship. Is this considered a taxable income? I have been told that it is not a taxable income; therefore, how do I claim it in Turbo Tax?

TurboTax Home & Biz Windows

Best answer by

You will have to report the amount on this 1099-MISC as income, because it's being reported to the IRS. It will appear on your Form 1040 as "Other Income" on Line 21. Then, you will report a corresponding negative amount on line 21 to zero out this income.

To report the income:

Enter the 1099-Misc in the Other Common Income section (Enter "1099misc" in the Search Box and Select "Jump to 1099misc")
Indicate that it is a "Reimbursement for Damages", that it does not involve work like your main job, and that it did not involve an intent to make money, and is not a recurring payment (received in the past or expected in the future).
The income will be reported on line 21 of your return.

To enter the expense:

Go to Less Common Income, Miscellaneous Income and Other reportable income (enter "other reportable income" in the Search Box and Select "Jump to other reportable income")
Continue to the screen "Other Taxable Income". Enter the description as "Cost of Damages" and the amount as a negative number. These are NOT wages.

A corresponding negative amount will be entered, and line 21 will be zero. See the attached screenshot example (different descriptions, but still offsetting).

Anonymous

Answer

To report the income:

Enter the 1099-Misc in the Other Common Income section (Enter "1099misc" in the Search Box and Select "Jump to 1099misc")
Indicate that it is a "Reimbursement for Damages", that it does not involve work like your main job, and that it did not involve an intent to make money, and is not a recurring payment (received in the past or expected in the future).
The income will be reported on line 21 of your return.

To enter the expense:

Go to Less Common Income, Miscellaneous Income and Other reportable income (enter "other reportable income" in the Search Box and Select "Jump to other reportable income")
Continue to the screen "Other Taxable Income". Enter the description as "Cost of Damages" and the amount as a negative number. These are NOT wages.

A corresponding negative amount will be entered, and line 21 will be zero. See the attached screenshot example (different descriptions, but still offsetting).