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mqngnx2585
New Member

On what line do I report income from a 1099-NEC -- income from an out-of-court lawsuit settlement?

 
3 Replies
LinaJ2020
Expert Alumni

On what line do I report income from a 1099-NEC -- income from an out-of-court lawsuit settlement?

It will show on line 8 of your Form 1040, carried over from Schedule 1.  Here are the steps:

 

In TurboTax online, 

  • Sign into your account, select Pick up where you left off
  • From the upper right menu, select Search and type in 1099nec and Enter
  • Select the Jump to 1099nec
  • Follow prompts
  • On screen, " Does one of these uncommon situations apply? select "lawsuit settlement" and Continue

Generally, most taxpayers who receive a Form1099-NEC are considered as self employed by the IRS and required to pay self-employment tax.  You will need to file a Schedule C reporting both income and any related expenses.  You will also need to file a Schedule SE to pay your self-employment tax.  If you received the form for a non-self employment income, you will enter it as Other Income on your Form 1040.  Follow the prompts in the TurboTax program and it will take you there.  To learn more, click here: 1099-NEC

 

 

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Lyndseymjo
Returning Member

On what line do I report income from a 1099-NEC -- income from an out-of-court lawsuit settlement?

How do we adjust the income if it was incorrectly reported on 1099-NEC? I received 1099-NEC for a lawsuit settlement that was for injuries and non-taxable. I need to report it but adjust my income so I am not taxed. 

Cynthiad66
Employee Tax Expert

On what line do I report income from a 1099-NEC -- income from an out-of-court lawsuit settlement?

You shouldl simply request a corrected document to show the settlement.  This item was reported to the IRS as such and will therefore be shown as income at IRS.

 

Take a look at your form. A 1099-NEC having an amount in box 1 and 1099-MISC with an amount in boxes 1, 5, 9, or 10 is a good indicator that it's self-employment income.

 

Whether you’re a sole proprietor, an independent contractor, a consultant or a freelancer, you’re probably getting some or all of your income reported on a 1099-NEC, 1099-MISC or 1099-K. You have flexibility to work the way you want, but it also means the government considers you to be self-employed — or even a business.

 

Follow these instructions to enter a 1099-NEC and/or 1099-MISC form. After you enter the info from your form, we’ll ask you a few questions to make sure it’s for self-employment. If not, we’ll link it to the correct income section of your return.

1099-MISC unrelated to self-employment

A non-work 1099-MISC would be for things like:

  • Prize money
  • Lawsuit settlements
  • Research studies
  • Other

Here ‘s how to enter a 1099-MISC that you may have received for another reason.

After you enter the info from your form, we’ll ask you a few questions to determine what type of 1099-MISC it is and link it to the correct income section of your return.

Key Points on 1099-NEC or 1099-MISC and Other Self-Employment Income

 

When you’re paid this way, there’s no withholding taken out of your income, which means you’ll pay both self-employment tax as well as income tax.

 

A benefit of being self-employed is that it enables you to have lots of write-offs as well, so make sure to enter all your expenses. This helps you reduce the taxes you might owe or increase your refund. We’ll help you get every possible tax break you deserve.

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