I received a settlement for back services as a contractor, but with no W2 or 1099-Misc from either the party that failed to pay in the proper year or my attorney. Per the IRS pubs, since this was a recovery of income I should be able to allocate my attorney's fees as an expense on the recapture of those wages. but that the full settlement amount will be taxed as income. I can see how to enter in TurboTax 2019 the data for the full settlement amount as miscellaneous income (please correct me if that's not how it should be entered). But when I go to enter the associated expense, TurboTax blocks any such entry stating that for 2019 all legal settlement expenses are disallowed in the "Other Deductions and Credits - Legal Fees" category. That seems to go against the "above the line" category of past income. Where and how should the attorney's expense be allocated?
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Had the debtor promptly paid you; how would you have entered it into your tax return?
It would have been reported as business income presumably if payment had been made on time.
"It would have been reported as business income presumably if payment had been made on time. "
You have answered question. It is business income reported on Schedule C , a little late and a little trimmed by the deductible lawyer fee.
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