Taxes owed for class action lawsuit

[Jackblack55]

Hello,

I was the lead in a class action lawsuit that paid out $300,000 but I received a 1099-MISC for the entire amount ($300,000) even though my portion (after attorney fees, etc.) was only $10,000!!!

How can I subtract the $290,000 from my taxes?

Thanks!

P.S.  did they send me the 1099-MISC vs the attorneys and why didn't they break down things and send me just a $10,000 1099-MISC form?

[KrisD15]

Attorney fees are only deducted for certain types of settlements. 

To clarify, can you say what type of lawsuit this was? 

HERE is a link with more information

[Jackblack55]

It was an ECOA settlement with a major bank.

[DaveF1006]

Yes. ECOA Settlement lawsuits are taxable. 

[Jackblack55]

This makes no sense at all..  am I liable to pay taxes on the entire $300,000 settlement of the civil case lawsuit when my portion (after lawyer fees and other fees) totaled $290,000?  Again, I received a $10,000 check but a $300,000 1099-MISC because I was the lead in the class action.  Wouldn't this be similar to a group of friends winning the lottery, split the winnings, but only the person who bought the ticket for the group pays taxes on the entire winnings?

[DawnC]

Who issued the 1099-MISC?   Have them correct it if it is for the wrong amount.  The money is taxable, but only the portion you received and attorney's fees.    Payments made to other class members should not be included on your 1099.  

[Jackblack55]

The bank that lost the class action lawsuit issued the 1099-MISC.  The attorneys received the lion share of the $300,000 and my portion was only $10,000!  Why would I be liable to pay taxes on attorney fees?  If that's the case, I would owe more money in taxes than my measly $10,000 portion!

[DaveF1006 · Accepted solution]

I answered this issue in the other post that you created and mentioned to get a corrected 1099 MISC. That is you best option.

A second option would be is to report the 1099 MISC for the full amount and then exclude $290,000.  This may run the risk of an IRS audit but you would prevail because you should not be responsible for attorney fees. Here is how to report.

1. Log into or open Turbo Tax
2. wages and income
3. Common income
4. Report 1099 MISC 

Once this is complete, Go to:

1. Less Common income
2. Miscellaneous Income, 1099-A, 1099>start
3. Scroll to the bottom of the page to Other Reportable Income
4. Other taxable income, answer yes
5. Then give a brief description of the income and the amount listed..
6. Here describe this as offset attorney fees for 1099 MISC and list the amount  as -$290,000.  This will exclude $290,000 of taxable income from your return.

[Jackblack55]

Thanks for all your help!