You should receive a W2 or a 1099-MISC in the year the settlement was paid. In that year you will report the income as appropriate from the form you receive.
To enter the W-2 in TurboTax Online you can:
- Open or continue your return in TurboTax
- Using the search feature, search for W-2 and select the Jump to link in the search results
- Enter the details from your W-2 in full
Follow these steps to enter your 1099-MISC:
- Open or continue your return
- Select the magnifying glass and search for 1099-misc. Select the Jump-to link
- Answer Yes to Did you get a 1099-MISC?
- If you already entered a 1099-MISC, you'll be on the 1099-MISC Summary screen, in which case you'll select Add Another 1099-MISC
- Enter the info from your form into the corresponding boxes
- If you need to enter boxes 4–6 or 8–17, check My form has other info in boxes 1–17 to expand the form
- Continue answering the following questions until you get to the Does one of these uncommon situations apply? screen and mark This money was from a lawsuit settlement
- Answer Was any part of the lawsuit settlement for back wages? as Yes then enter the amount
- Proceed entering/reviewing your return
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