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My 1099misc includes both my settlement income as well as the monies awarded the law firm, however it's all lumped together in box3 as my total income. is this correct?

this was for a lawsuit settlement. I received only a portion of the income listed in box3; there are 'vendor payable' lines of info below the boxes, and lists out separately my share and the law firms share, but lumps it all together as income in box3, making it look like I received all of it, which I did not.

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Phillip1
New Member

My 1099misc includes both my settlement income as well as the monies awarded the law firm, however it's all lumped together in box3 as my total income. is this correct?

The nature of the tax on settlement income depends on the origin of the suit.

Since there was a 1099-MISC issued, the settlement is most likely taxable income (if the lawsuit was for personal physical injury or physical sickness, the settlement would be tax free) Unfortunately, the amount you will have to claim as income is the amount on the 1099-MISC. 

You can deduct the legal fees associated with your settlement (because the lawsuit produced taxable income) as a miscellaneous itemized deduction subject to the 2% of adjusted gross income floor.

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3 Replies
Phillip1
New Member

My 1099misc includes both my settlement income as well as the monies awarded the law firm, however it's all lumped together in box3 as my total income. is this correct?

The nature of the tax on settlement income depends on the origin of the suit.

Since there was a 1099-MISC issued, the settlement is most likely taxable income (if the lawsuit was for personal physical injury or physical sickness, the settlement would be tax free) Unfortunately, the amount you will have to claim as income is the amount on the 1099-MISC. 

You can deduct the legal fees associated with your settlement (because the lawsuit produced taxable income) as a miscellaneous itemized deduction subject to the 2% of adjusted gross income floor.

My 1099misc includes both my settlement income as well as the monies awarded the law firm, however it's all lumped together in box3 as my total income. is this correct?

Thank you. I'm guessing then, if I happened to get married that same year, that the 2% floor becomes the AGI for my husband and I? Does this include the monies from the settlement, or the AGI prior to that amount being added, do you know?
Phillip1
New Member

My 1099misc includes both my settlement income as well as the monies awarded the law firm, however it's all lumped together in box3 as my total income. is this correct?

The AGI includes both of your income and the taxable settlement income.
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