Class action lawsuit

Forum|Forum|2 years ago
November 12, 2023
2 replies
26 views

Good Morning

I received a check with a little over $800.00 from a class action lawsuit, my intention is to deposit it into my traditional IRA - my question is would I have any issue with the IRS since I'm trying to avoid any additional tax payment for this his year.

I do not have any issue with max amount in deposit since I have not deposit anything this year to my IRA.

Not A Product Question

Best answer by dmertz

Expert Reviewed

I assume that the payment has nothing to do with restoring value to investments in your IRA that were mishandled that would result in the deposit being a restorative payment to the IRA and that the payment was not a recovery of wages that had not been paid.

The $800 from the settlement is simply cash. To be eligible to contribute to an IRA you must have compensation from working and the contribution must be made in cash.

Bsch4477

Level 15

There’s no problem with you using that payment as a contribution to your IRA.

The $800 is taxable unless the settlement was for physical harm, discrimination of any kind, loss of income, or devaluation of an investment.

dmertzAnswer

Level 15

Expert Reviewed

The $800 from the settlement is simply cash. To be eligible to contribute to an IRA you must have compensation from working and the contribution must be made in cash.