EIN Number for the payor of a Securities Litigation Settlement not available

[mppatelboise]

Hello,

TurboTax is not allowing me to file my return without the EIN number for the payor of a Securities Litigation Settlement. This payor has also not provided a 1099. How do I circumvent this?

[MonikaK1 · Accepted solution]

If you received a litigation settlement and you didn't receive a Form 1099 (or W-2), contact your legal representative or other payer to confirm that none was issued. If one was issued, it needs to be accounted for on your return.

If no 1099 or W-2 was issued, then enter your legal settlement as other income in TurboTax without a Federal ID if none was provided, to the extent that it is taxable.

Whether a lawsuit settlement payout is taxable depends on what the settlement represents. If this is a refund of previously paid insurance premiums, then it is nontaxable unless the amount was previously deducted on your tax return. The taxable amount would be entered in the Other Common Income section or Less Common Income, Miscellaneous Income. 

If you didn’t receive a 1099-MISC:

1. Sign in to TurboTax and open or continue your return.
2. Search for lawsuit settlement and select the Jump to link.
3. Answer Yes to the question Any Other Taxable Income?
   • If you've already entered miscellaneous income, select Add Another Miscellaneous Income Item.
4. Enter a brief description and the amount you received and select Continue.

See this help article for more information.

However, it would be unusual in the case of a taxable settlement for no information return, such as a 1099, to be issued.

Check the terms of the legal settlement. If it was a large class action, details may be available online. It depends on the type of settlement proceeds you received and what they represented. If you received punitive damages, this would be taxable income, and often a Form 1099 would be issued. 

Property settlements for losses in the value of a property that are less than the adjusted basis of your property are not taxable and generally do not need to be reported on your tax return. However, you must reduce your basis in the property by the amount of the settlement. If the property settlement exceeds your adjusted basis in the property, the excess is income. 

See this IRS article and  IRS Publication 4345 for more information about the tax treatment of lawsuit settlements.

[SesquimGuy]

I used a Form 1099B worksheet (found under forms) to create transactions not reported to 1099B's; entered 0 basis and amount received plus the go to box F (no 1099 issued). This creates another entry on the 8949 which tracks log term capital gains. That puts an entry in Part II, Long-Term, line 10, Capital Gains and Losses. My understanding is that no 1099 is issued if the individual settlement was under $600. EIN is obviously not available without a 1099 and line 10 appears to be specifically provided for this case. Can't say what the IRS decision is on this but I've certainly waited long term for this gain whether the original trade(s) were gains or losses.

[MaryK4]

@SesquimGuy The way you did this is correct.