1099-misc for class action lawsuit (non-wage). "Other income" and "gross proceeds paid to an attorney" are filled. TurboTax asks if Attorney fees taxable. How do I know?

[alatalia]

I did not received the fees, just received the amount in box 3 (Other income).

[JohnB5677]

Attorney fees are taxable unless the lawyer is pursuing taxable income on your behalf.  This is usually an effort to recapture wages.

You stated that this was a non-wage issue.  So the attorney fees are taxable.  However, you can simply enter the number you have in box 3.  If you got that amount the fees will have been taken care of.

[alatalia]

This is actually more complicated...

The Class Action Lawsuit itself WAS wages-related. I have received a settlement payment where 50% of the payment are wages (with taxes withheld) and the other 50% non-wage income for interest, liquidated damages and statutory and civil penalties. I got W2 for wages and 1099-MISC for the other income. 1099-MISC has the pro rata share of the attorneys' fees (in box 10).  With all this additional information, what part of the attorney fees on 1099 is taxable to me (if any)? 

Thank you so much!

[macuser_22]

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@alatalia wrote:

This is actually more complicated...

The Class Action Lawsuit itself WAS wages-related. I have received a settlement payment where 50% of the payment are wages (with taxes withheld) and the other 50% non-wage income for interest, liquidated damages and statutory and civil penalties. I got W2 for wages and 1099-MISC for the other income. 1099-MISC has the pro rata share of the attorneys' fees (in box 10).  With all this additional information, what part of the attorney fees on 1099 is taxable to me (if any)? 

Thank you so much!

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For 2020 only attorneys fees for discrimination lawsuits are deductible.   The Tax Cuts and Jobs Act (TCJA) eliminated all other attorneys fee deductions.

[alatalia]

So when Turbo Tax asks me if the attorney fees are taxable, do I enter the amount of pro rata fee (in Box 10 1099-MISC)? Even if I have not gotten these funds?

Thank you!

[macuser_22]

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@alatalia wrote:

So when Turbo Tax asks me if the attorney fees are taxable, do I enter the amount of pro rata fee (in Box 10 1099-MISC)? Even if I have not gotten these funds?

Thank you!

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Yes, it is your taxable income whether you received the  money and paid the attorney with it or it was paid directly to the attorney,