My former employer paid my attorney as part of a settlement. The employer reported the attorney fees on a 1099-MISC. Do I pay taxes on the attorney fees?

[stevehill6030]

The employer entered the amount in box 15 and didn't enter amount in box 7

[DanielV01]

Is it box 15a or 15b?

[stevehill6030]

my mistake, it was in box 14

[DanielV01]

That makes a difference.  Now, my question is, are you listed as the one paying the money or the one receiving it?

[stevehill6030]

neither --- the employer paid the attorney directly --- again the employer agreed to pay the attorney who negotiated the settlement

[DanielV01]

You have nothing to report.  The employer has provided you this information for your records.  Since you are not listed neither as the one paying the lawyer nor as the one receiving the funds, this is not income to you.  A description of this situation can be found here:  (Click on link below, then go to pg. 2, col. 2 under subheading:  Payments to attorneys.)

Instructions for Form 1099-MISC (2018) | Internal Revenue Service

[Angsmith313]

I received a settlement for back wages and issued a W2. I was also issued a 1099 Misc for attorney fees (box 13). The employer issued two separate checks thus the attorney fees never passed through me. It appears I need to file the amount of the attorney fees as above the line deduction per 62(e). This seems to be clear as mud 🤔 HR Block wants to place this as income then add the expense on schedule A yet that appears illegal. Turbo Tax had me place above the line as referenced above. I need help, much appreciated. 

[MaryK4]

In TurboTax, the 1099-MISC Box 14 for the Attorney's fees forces you to create a Schedule C for Self-Employment income because these are usually reported directly to the attorney who must report it as income.  Delete the entry for the 1099-MISC and enter as Miscellaneous Income with the description 1099-MISC Box 14 Attorney's fees.  This will show as income but then be cancelled out by the 62e deduction.

@Angsmith313

[Angsmith313]

I am not self-employed thus creating a schedule C does not meet the new tax codes. Also, I am not permitted to add into a schedule A for itemized deductions. Please advise.

[Angsmith313]

In addition the attorney fees are placed in box 13 of the 1099 MISC. The only reference I can find that is legitimate to record the 1099 is above the line on the 1040.

[MaryK4]

As I said, you must delete the 1099-MISC entry then add as Miscellaneous Income with the 62e deduction.  Please note: If it is NOT an unlawful discrimination you CANNOT deduct the legal fees and if you do not report the legal fees as income the IRS will most likely contact you.  

[ Edited 2/23/2020 | 4:41 PST ]

@Angsmith313

[Angsmith313]

I am sorry but so confused. How do I make that happen within the Turbo Tax software?

[MaryK4]

Are you sure it is Box 13?  That is for Golden Parachute Payments.   

If it is the Attorney Fees, follow these steps:

Select Federal Taxes, Wages & Income, I'll Choose What to Work On

Scroll to Less Common Income, and select Miscellaneous Income, 1099-A, 1099-C

Select Other Income not already reported on For W-2 or for 1099

Select Yes

Continue until you see Any Other Earned Income, and select yes, now on the next screen select other

Complete the information

@Angsmith313

[Angsmith313]

This is my question. The employer settled my lawsuit because of my unlawful claims against them. Of course the settlement states no undue harm on both parties in the best interest of the employer and for me as the employee to gain back wages. Wages paid were inclusive of all taxes owed.

[Angsmith313]

But I received a 1099 MISC for the attorney fees.