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posted Jan 14, 2020 7:44:22 AM

I received a partial lawsuit settlement for back wages, but no W-2 or 1099-MISC

Hi there!

 

I received a partial lawsuit settlement for $20k in back wages in 2019. Since my lawyers haven't received the full amount, they are continuing with litigation against my former employer.

 

The company is based in Australia, and they've never given American employees tax forms. My lawyers are trying to secure a W-2 or 1099-MISC, but I doubt my former employer will produce them.

 

How would I pay taxes on the partial settlement??

 

Thank you.

0 1 758
1 Best answer
Expert Alumni
Jan 14, 2020 2:41:50 PM

You will need to report the settlement on back wages on your tax return this year even if it just a partial settlement. All funds, you received during the year, need to be reported even if you do not receive a 1099-Misc.or another tax document. 

 

The Gross Settlement amount should be entered as income even if your attorney's fees were deducted from amount you receive.

 

To enter the settlement income you need to:

  1. Select Federal in the black bar on the left.
  2. Select Income & Expenses at the top of the screen.
  3. Select Less Common Income . If the category is not  shown select Other Income below the current incomes listed. Additional income selection will be shown.
  4. Select Miscellaneous Income, 1099-A, 1099-C. 
  5. Select  Other reportable income
  6. On the next screen you will be asked you if you received a taxable court settlement - Select the Yes tab and enter the settlement information.

If you subsequently receive a 1099-Misc or a W-2 you will need to delete this income entry and enter the form on your return.

 

Prior to 2018 you would have entered the attorney fee amount in the Miscellaneous Itemized Deductions subject to 2% on Schedule A. Under The Tax Cuts and Jobs Act this section is no longer available.

1 Replies
Expert Alumni
Jan 14, 2020 2:41:50 PM

You will need to report the settlement on back wages on your tax return this year even if it just a partial settlement. All funds, you received during the year, need to be reported even if you do not receive a 1099-Misc.or another tax document. 

 

The Gross Settlement amount should be entered as income even if your attorney's fees were deducted from amount you receive.

 

To enter the settlement income you need to:

  1. Select Federal in the black bar on the left.
  2. Select Income & Expenses at the top of the screen.
  3. Select Less Common Income . If the category is not  shown select Other Income below the current incomes listed. Additional income selection will be shown.
  4. Select Miscellaneous Income, 1099-A, 1099-C. 
  5. Select  Other reportable income
  6. On the next screen you will be asked you if you received a taxable court settlement - Select the Yes tab and enter the settlement information.

If you subsequently receive a 1099-Misc or a W-2 you will need to delete this income entry and enter the form on your return.

 

Prior to 2018 you would have entered the attorney fee amount in the Miscellaneous Itemized Deductions subject to 2% on Schedule A. Under The Tax Cuts and Jobs Act this section is no longer available.