Are awards from class action suits taxable?

[adamhurwitz]

Hi TurboTax community, I recently received a small award from Apple due to a class action about a MacBook keyboard litigation settlement.

1. Are the awards from this class action suit taxable?
2. If the awards are taxable would this be under the category in TurboTax "Wages & Income" > "Less Common Income" > "Show more" > "Miscellaneous Income, 1099-A, 1099-C" > "Other reportable income"?

Much appreciated!

[adamhurwitz · Accepted solution]

From the IRS' Tax implications of settlements and judgments it seems that a class action suit could potentially be categorized as punitive damages and be considered taxable.

> Punitive damages are not excludable from gross income, with one exception. The exception applies to damages awarded for wrongful death, where under state law, the state statute provides only for punitive damages in wrongful death claims. In these cases, refer to IRC Section 104(c) which allows the exclusion of punitive damages. Burford v. United States, 642 F. Supp. 635 (N.D. Ala. 1986).

[Bill452]

What if a person received an award (i.e., $150.00) from a class action lawsuit that was not a result of a personal injury, but never received a 1099 MISC from the settlement administrator? When I called the settlement administrator about when they will be sending out a 1099 MISC to me, I was informed that they do not send out 1099 MISC and they do NOT have a tax identification number (TIN). Please note, I do have a claim number for this class action lawsuit. That said, I have entered the information in Turbo Tax Deluxe as other income even though I have not receive a 1099 MISC and will not be receiving one from them. However, the Turbo Tax Deluxe program continues to prompt me to enter either a TIN or social security number.

As mentioned above, I do have a claim number that was provided to me by the settlement administrator. Am I required by the Internal Revenue Service to include in my 2024 federal tax return their TIN or social security number which the settlement administrator states they do not have one for this class action settlement? The Turbo Tax Deluxe program continues to prompt me to enter either their TIN or social security number. What is the workaround for this situation?

[Vanessa A]

Yes, you still need to report this income even though you did not get a 1099 and it was only $150. 

No.  You are not required to include the payer of the class action suits TIN or social security number.  

Where are you entering this settlement?  If you do not have a 1099-Misc, you will need to enter this as other income in the less common income section.

To enter your income from a settlement click the following:

• Federal
• Income and Expenses
• Scroll down to Less Common Income and click Show More
• Start next to Miscellaneous Income
• Start next to Other Reportable Income

This will put it on line 8z of your schedule 1 as other income. 

You will also need to delete the 1099-Misc entries that you made.