1099-Misc Lawsuit. Nothing in boxes 1 or 3.

[sdavidson74]

Hi Community,

I received a 1099-Misc from a lawsuit and was surprised to see only information in Box 10.  The form was made out to me and I was expecting to see Box 3 filled with 'other income.'  Is this 1099 incorrect?  There is nothing in any box other than Box 10.  Did I mistakenly receive the attorney's copy?

[DianeW777]

No, you did not mistakenly receive the attorney's copy. Generally, money paid to an attorney in a lawsuit is taxable income to the individual seeking settlement. 

Gross proceeds paid to attorneys. - Instructions for who must file Form 1099-MISC

Under section 6045(f), report in box 10 payments that:

• Are made to an attorney in the course of your trade or business in connection with legal services, but not for the attorney’s services, for example, as in a settlement agreement;
• Total $600 or more; and
• Are not reportable by you in box 1 of Form 1099-NEC. 

Generally, you are not required to report the claimant's attorney's fees. For example, an insurance company pays a claimant's attorney $100,000 to settle a claim. The insurance company reports the payment as gross proceeds of $100,000 in box 10. However, the insurance company does not have a reporting requirement for the claimant's attorney's fees subsequently paid from these funds.

These rules apply whether or not:

• The legal services are provided to the payer;
• The attorney is the exclusive payee (for example, the attorney's and claimant's names are on one check); or
• Other information returns are required for some or all of a payment under another section of the Code, such as section 6041.

If you are not in business as an attorney, and if you received some type of settlement, then it is income to you as miscellaneous income.

You can use the following steps to enter your income in this situation where the income is not reported on Form 1099-NEC as self-employment:

1. Sign into your TurboTax account > Select Tax Home > Wages and Income > Scroll to Less Common Income
2. Select Miscellaneous Income, 1099-A, 1099-C, Start or Revisit > Other reportable income, Start or Revisit
3. Any other taxable income answer yes > Enter your description and amount

[sdavidson74]

Thank you for the reply.  I am the claimant in this particular case.  Im still wondering why the amount I won in the lawsuit wasn't added anywhere else on this document.  One portion of the winnings was sent on a W-2 and the attorney's fees are captured on this document.  However,  the other 1/3 of the winnings wasn't shown as 'other income.'  That's why I'm feeling that this document is not correct.  Both myself and the attorney received separate checks. 

Getting back to the attorney's fees for a moment - is 100% of those fees taxable to me?  Or is there a percent that needs to be reported?

[KrisD15]

Would you be so kind as to tell us what the settlement was in reference to for clarification? 

Settlements and deductible attorney fees are based in part on what the lawsuit was based on. 

IRS link with information.

[sdavidson74]

This was a wrongful termination lawsuit.

[DianeW777]

Wrongful termination in and of itself would not be considered tax free. The link provided by @KrisD15 will help you decide if it had anything to do with discrimination.  If you were wrongfully terminated for such things as race, gender, age, religion, or disability, this could be discrimination.

@sdavidson74