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New Member

How do I report a settlement from a class action suit in TurboTax?

In 2012, I sold a stock at a significant loss which was reported on my tax return. In 2015 I received a check from a class action lawsuit against the company that issued the stock. I did not receive a 1099 for this. Where do I report this income in TurboTax. 

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Level 14

How do I report a settlement from a class action suit in TurboTax?

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:

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:

• Select Federal Taxes
• Select Wages and Income
• Scroll down and select Show More at Other Common Income
• Select Start/Update next to Income from Form 1099-Misc.
• Answer Yes to the question Did you get a 1099-MISC? (even if you didn't get one).
• Complete the top part and then enter the award amount
• Enter a reason for the 1099-Misc.
• Select "This was money from a lawsuit settlement" on the "Does one of these uncommon situations apply?" screen

Interest earned on a lawsuit settlements is taxable income and should be entered as a Form 1099-INT. Punitive damages are taxable and should be reported as “Other Income” on line 21 of Form 1040, even if the punitive damages were received in a settlement for personal physical injuries or physical sickness.

See IRS Publication 4345 for more information.

https://www.irs.gov/pub/irs-pdf/p4345.pdf
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7 Replies
Highlighted
Level 14

How do I report a settlement from a class action suit in TurboTax?

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:

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:

• Select Federal Taxes
• Select Wages and Income
• Scroll down and select Show More at Other Common Income
• Select Start/Update next to Income from Form 1099-Misc.
• Answer Yes to the question Did you get a 1099-MISC? (even if you didn't get one).
• Complete the top part and then enter the award amount
• Enter a reason for the 1099-Misc.
• Select "This was money from a lawsuit settlement" on the "Does one of these uncommon situations apply?" screen

Interest earned on a lawsuit settlements is taxable income and should be entered as a Form 1099-INT. Punitive damages are taxable and should be reported as “Other Income” on line 21 of Form 1040, even if the punitive damages were received in a settlement for personal physical injuries or physical sickness.

See IRS Publication 4345 for more information.

https://www.irs.gov/pub/irs-pdf/p4345.pdf
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

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Returning Member

How do I report a settlement from a class action suit in TurboTax?

In case there is no 1099-MISC, what EIN number do I put? The shareholder litigation fund check did not have any EIN.
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Returning Member

How do I report a settlement from a class action suit in TurboTax?

Most class action lawsuit settlements do not send a 1099-MISC, if you did not receive one and follow this answer, it will show a red exclamation point error, asking for EIN or SSN which one is not going to have if they don't send a 1099-MISC.

To resolve, type in lawsuit settlement in search box, then Jump to lawsuit settlement link in box that pops up and fill in the info. The info entered carries over to your schedule 1 line 21 and then 1040 line 6 just like this method but no errors.
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Returning Member

How do I report a settlement from a class action suit in TurboTax?

Was not able to post link in last message. For more details see following answer.

https://ttlc.intuit.com/questions/4324380-i-recieved-a-class-action-lawsuit-settlement-from-fedex-co...

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New Member

How do I report a settlement from a class action suit in TurboTax?

When I go through the steps to input the 1099-INT from my class action settlement, the first prompt is: 

 
"Let's get your tax info
We’ll help you find and import info from your bank or financial institution."
 
I don't know what bank or institution to put in and don't see one listed on my paperwork and it won't let you skip that prompt.
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Expert Alumni

How do I report a settlement from a class action suit in TurboTax?

Normally a class action suit would be reported on a 1099 MISC form and not a 1099 INT, which is used to report taxable interest paid from a financial institution. if this is reported to you on a 1099 INT, whoever issued this to you reported it on the incorrect form.

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New Member

How do I report a settlement from a class action suit in TurboTax?

Thanks, Irene for your detailed explanation on the tax-ability of a class action lawsuit.  It settled my questions just fine!  The law firm even sent 1099s for Int and Misc as well as a W-2 for the lost income, so we didn't have the problems that the other responders had.