1099 MISC, w2 and attroney fees

[achalnyg]

I got a W-2 and a 1099-misc for a wage settlement lawsuit.  I have determined from the forums that both need to be entered in TT.  1099 misc. is for $8595 which includes attorney fees of $4362. If I subtract attorney fees from 1099 misc. income from box 3, the amount of $4233 is identical to W2 amount. I have entered W2 amount under W2 wages and salary as well as entered 1099 MISC under other income. Am I reporting this twice and paying taxes on both? When I was entering 1099 Misc income, it asked me if they were for back wages. What should I answer there? 

[achalnyg]

This settlement was for overtime not paid in the past

[DianeW777]

The W-2 is entered as normal in the W-2 section of your return. The Form 1099-MISC is entered as a legal settlement and answer, yes, it was for back wages. See the link below for detailed steps.

• Where do I enter the award for a taxable legal settlement?
• Are legal settlements taxable?

The full settlement is taxable and the attorney fees are not deductible. See the article below about deducting legal fees. 

• Can I deduct legal fees on my taxes?

The law changed. Legal fees used to be a deduction under Miscellaneous Expenses when using itemized deductions and it was limited to the amount that exceeded 2% of adjusted gross income (AGI).  Since the Tax Cuts and Jobs Act (TCJA) enactment this has been eliminated for tax years 2018-2025. It remains to be seen if it will automatically revert back in 2026. This may depend on what the legal fees are actually for.  

[achalnyg]

I followed all the instructions and entered all the information. I am under 1099 mis screen where it asks me if those was related to back wages. I entered "Yes" and now it's asking me to enter the amount for back wages. My 1099 mis amount box 3 is $8595.74 including attorney's fees of $4362.19 and W2 amount is $4233. Which amount will I enter in back wages box? 

[ThomasM125]

The $4,233 would be the back wages, assuming that was what the lawsuit was for and that is what was awarded to you for missed wages.

[achalnyg]

Thank you! Which form will show all these adjustments once it's fully entered in TT? 

[ThomasM125]

The Form 1099-MISC income will show on Schedule 1, line 8(z). The lawyer fees will show on the same line as a reduction of the income. The net will show on line 8 of Form 1040 as additional income.

To view your form 1040 and schedule 1 to 3:

1. Choose Tax Tools from your left menu bar in TurboTax Online while working in your program
2. Choose Tools
3. Choose View Tax Summary
4. See the Preview my 1040 option in the left menu bar and click on it
5. Choose the Back option in the left menu bar when you are done