Lawsuit Settlement Help. Received 1099misc and W2 ...
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Returning Member

Lawsuit Settlement Help. Received 1099misc and W2 (Settlement was for overtime not paid)

I received a settlement check in 2020 for overtime not paid by an employer. I have not received a 1099misc and a W2. I inputted the W2 and when I go in to put my 1099misc (BOX 3 and Box10) I'm being asked what portion of the attorney fees are taxable (not sure) then it is also asking me to fill out a Schedule C (I'm not self Employed) What do I do? Am I entering anything incorrectly? 

Additional info if needed: 50% of the settlement payment constitutes wages (hence the W2) and the other 50% was non-wage income for interest, liquidation damages, and civil penalties (1099misc)

3 Replies
Employee Tax Expert

Lawsuit Settlement Help. Received 1099misc and W2 (Settlement was for overtime not paid)

No, you don't want your 1099-Misc for a settlement to be reported as Self-Employment income on Schedule C.

 

You can Delete Schedule C  from your return, and you may want to Delete/Re-Enter your 1099-Misc.  This link tells How to Delete a Form in TurboTax Online

 

Click this link for info on How to Enter a 1099-Misc for a Settlement.

 

This link gives details on How to Enter a W-2 for a Settlement.

 

Attorney Fees are deductible if incurred trying to get Taxable Income for you (Wages).  If some part of the attorney's fees are for obtaining 'punitive damages', those would not be deductible.   You can verify if the Attorney Fees were split with the law office.

 

Click this link for more info on Deducting Attorney Fees on 1099-Misc

 

 

 

 

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Returning Member

Lawsuit Settlement Help. Received 1099misc and W2 (Settlement was for overtime not paid)

@MarilynG1 Because of the attorney fees listed in Box 10, it keeps saying I have to fill out a schedule C. Doesn't sound right to me. No way to just delete Schedule C because of box 10

Employee Tax Expert

Lawsuit Settlement Help. Received 1099misc and W2 (Settlement was for overtime not paid)

An alternative way of reporting miscellaneous income is through Less common income.

 

To report the settlement check, follow these steps:

  1. From the left menu, go to Federal and select the first tab, Wages & Income.
  2. Add more income by scrolling down to the last option, Less Common Income, and Show more.
  3. Scroll down to the last option, Miscellaneous Income, 1099-A, 1099-C and Start.
  4. Choose the last option, Other reportable income and Start and Yes.

Also, you initially stated that you have not received either Form W-2 or Form 1099-MISC. If you are trying to report wages as if you had Form W-2 without Form W-2, keep in mind the IRS will not be able to match it.

 

For more details from the IRS, see: Tax Implications of Settlements and Judgments

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