Class Action Settlement

Meant to add, I’m filing as self-employed and have made less than $600 this year. Just wondering if this applicable.

The IRS requires that all income be reported.  You will need to report the settlement check as other income.

To enter your class action settlement check in TurboTax follow these steps: 

1. Sign in to your TurboTax account
2. Click the Income & expenses tab
3. Scroll down to other less common income
4. On the Line Miscellaneous Income, 1099-A, 1099-C click Start
5. On the page Let's Work on Any Miscellaneous Income scroll down to Other reportable income Click Start
6. On the page Any Other Taxable Income? Check yes
7. Follow the screen prompts to enter your class action settlement check.

Also, you will be required to file Schedule C if your income after expenses is greater than $400.  To enter your self-employment in TurboTax follow these steps:

1. Open or continue your return
2. Search for schedule c and click the Jump to link in the search results
3. Answer Yes to Did you have any self-employment income or expenses?
   • If you've already entered self-employment work and need to enter more, select Add another line of work
4. Follow the onscreen instructions to enter your information.

class action lawsuits are generally designed to deal with situations where the injury is material (i.e., a defective product or consumer fraud), rather than physical (personal injury or sickness). So, class action settlement money will, in general, be taxable. The same goes for any awards resulting from employment lawsuits, or any lawsuit that does not involve physical harm.