Legal settlements are
reported as "Other Taxable Income."
You may or may not
receive a 1099-MISC reporting the income. Regardless, this is
how you should enter it in TurboTax:
- Click on Federal Taxes >
Wages & Income [In TT Self-Employed: Personal >
Personal Income].
-
Scroll down to the Other Common
Income section and click on the Start/Update box
next to Income from Form 1099-MISC.
[See Screenshot #1, below.]
- If you previously entered a 1099-MISC.
in your return, you will be brought to the 1099-MISC
Summary page. Click on the Add Another 1099-MISC. box
to add a new form [or Edit to change an
existing form]. [Screenshot #2]
- If you haven't already entered a 1099-MISC,
answer Yes to the question Did you get a
1099-MISC? (even if you didn't get one).
- On the Let's get the info from
your 1099-MISC screen, complete the top part and then enter the award
amount in Box 3 Other Income. [Screenshot #3]
- Fill out any other boxes from your
paper 1099-MISC (if you have one), then click Continue.
- Enter a reason for the 1099-MISC.
[Screenshot #4]
- On the screen, Does one of
these uncommon situations apply? select This was money from a
lawsuit settlement and then answer the back wages question
before clicking Continue. [Screenshot #5]
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