Lawsuit settlement question

Forum|Forum|5 years ago
April 25, 2021
10 replies
37 views

I got a settlement in a lawsuit pertaining to a photo that was wrongfully used. My lawyer worked on a 50% contingency basis. There were three defendants. My lawyer had the money paid to him and gave me my cut. One of the defendants sent me a 1099-Misc for the full amount they paid. I never received a 1099 from my lawyer or the other defendants for the rest of the money. Do I ask my lawyer for a 1099? Will it be in the full amount that was paid to him or just the money he sent me? I am confused and new to all this.

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fauxtoe21Author

Level 2

I talked to my lawyer. He said he doesn't need to send me a 1099 because the money went through a trust account. He said he "was technically never in possession of the funds and it wasn't paid from me - it was paid by the Defendants and just routed through my escrow account. "

My question is: how do I report this on my taxes? Do I report the full amount or the amount I received? How do I report the one 1099 I did receive?

Please help!!

DawnC

Level 15

You need to report the full amount that you received. You can enter the 1099 that you received and enter the remainder of what you received as other income. The 1099 will also get reported on the same line as the other income. The total should be the total of what you actually received in the lawsuit. The link below gives instructions for reporting both pieces.

Where do I enter an award from a taxable legal settlement?

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fauxtoe21Author

Level 2

Thank you!

The one 1099 I did receive was for the full amount not subtracting what my lawyer got. So, do I take that full amount and add it to whatever adds up to the total amount I got? Example: Say total amount I received from the suit was $15K. The 1099 was for $5K. Do I just add $10K to that and report it?

Thanks again!