Skip to main content
Level 2
February 21, 2025
Question

1099-MISC

  • February 21, 2025
  • 3 replies
  • 47 views

I received a net settlement check of $463 from the Bumble class action lawsuit. The gross recovery was $777 for me, but they deducted $314 to pay attorney’s fees. The 1099-Misc form I received shows the $777 in Box 3. Other Income. Why do I have to pay taxes on the full $777 when I only received a check for $463?

3 replies

rjs
Level 15
Level 15
February 21, 2025

That's the law. Basically you received a settlement of $777, then you used $314 of your settlement to pay the attorneys. It's the same as if you had received a check for $777, then wrote a check for $314 to pay the attorneys. The full amount that you received, before paying the attorneys, is taxable income. The attorneys' fees are not tax deductible.

 

Alumni - Intuit
February 21, 2025

Attorney fees are only deducted for certain types of settlements. 

 

For more information: IRS Tax implications of settlements and judgments

 

Assuming I understand correctly, the Bumble class action was a securities lawsuit.

 

Because the entire settlement — including attorneys' fees — will generally be income to the claimant, the full amount must be reported as paid to the claimant.

 

Enter a 1099-MISC for lawsuit settlement:

  1. Open or continue your return.
  2. Navigate to the 1099-MISC section:
    • TurboTax Online/Mobile: Go to 1099-MISC.
    • TurboTax Desktop: Search for 1099-misc and select the Jump to link.
  3. If you're asked Did you get a 1099-MISC?, answer Yes.
    • If you've already entered a 1099-MISC, select Add another 1099-MISC.
  4. Enter the information from your 1099-MISC and select Continue.
  5. On the Describe the reason for this 1099-MISC screen, enter lawsuit settlement and select Continue.
  6. On the Does one of these uncommon situations apply? screen, select This was money from a lawsuit settlement and then answer the back wages question before selecting Continue.

TurboTax FAQ: Where do I enter an award from a taxable legal settlement?

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"
daleritAuthor
Level 2
February 21, 2025

Thanks. Pretty crappy I’ll end up paying $345 in taxes and my check was for $463.