Court Settlement

[Johnsbr2]

If I file my taxes with a Turbo Tax expert will they be able to determine how much of my court settlement needs to be taxed by obtaining details and reviewing the case?

[Opus 17]

To get that kind of advice, you would need to upgrade to either the Live Assistance or Full Service versions of Turbotax Online. (I should add that no one will download the court docket for you and analyze the case.  That's far beyond any ordinary tax preparer's normal terms of service.  What they will do is ask you questions about the case to figure out the issues and help explain how the tax law treats different kinds of settlements.)

In general, settlements are taxed according to the kind of income they replace.  Lost wages are taxed as wages, punitive damages and interest are taxable as miscellaneous income, and settlements for personal injury are not taxable (although if there is an interest component for late payment, that may be taxable).  Can you provide any further information?

[DaveF1006]

No. They will base their preparation from the 1099 MISC or an another taxable document. They will not research the court case to gain additional information about the preparation of your return. The will rely on your information given to them by you.

[Johnsbr2]

Hi! The issue is I did not receive a 1099 from the court or my lawyer. So I want to ensure I am reporting accurately 

[Opus 17]

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@Johnsbr2 wrote:

Hi! The issue is I did not receive a 1099 from the court or my lawyer. So I want to ensure I am reporting accurately 

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Again, it depends on what exactly the settlement was for.  If you upgrade to Live Assist or Full Service, your expert can help to determine the taxability of the settlement, but you will have to provide documents or other facts about the case, they aren't going to do legal research for you.  I presume you have some kind of notice of settlement that describes what the case was about and the terms of the settlement.  If you can provide more details, the volunteers and turbotax employees on this forum may also be able to help you. 

[Johnsbr2]

Yes, I was the guarantor on a lease for a rental space in a shopping plaza for a family business. The landlord paid for the lease to broken early. There was a dispute on who the funds should go to, either the owner of the business or whose name the lease was in. The funds were held by the court until a court decision was made. I won the case and they released the funds to my lawyer. No one has sent a 1099. 

[DaveF1006]

You may report this as other income.

You can report this as other income on TTO.  To report in Turbo Tax Online. 

1. Log into your account
2. Select Wages and income
3. Less Common income
4. Miscellaneous Income, 1099-A, 1099>start
5. Scroll to the bottom of the page to Other Reportable Income
6. Other taxable income, answer yes
7. Then give a brief description of the income and the amount listed. Call it Lawsuit Settlement and then the amount of the settlement.

[Opus 17]

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@Johnsbr2 wrote:

Yes, I was the guarantor on a lease for a rental space in a shopping plaza for a family business. The landlord paid for the lease to broken early. There was a dispute on who the funds should go to, either the owner of the business or whose name the lease was in. The funds were held by the court until a court decision was made. I won the case and they released the funds to my lawyer. No one has sent a 1099. 

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If you were the business, I would probably treat it as a rent rebate or discount.  It might not be taxable, but the business would take a reduced expense deduction for the rent (or they could deduct all their rent and then report this as taxable income.).

Since you are not the business and you don't have any expenses to offset the income, I agree that "other reportable income" is the best way to go, assuming there are no other weird facts.