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Level 2
posted Mar 23, 2024 11:38:53 AM

Settlement taxable

I received a check from a Yahoo data breach settlement in 2023.  Is this taxable?  If so, how do I report it on my taxes?

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1 Best answer
Employee Tax Expert
Mar 24, 2024 7:15:17 AM

As SharonD007 mentioned, legal settlements are often taxable.  Non-injury settlements are considered other taxable income. Normally companies do not issue a Form 1099-MISC for payments under $600, but you should still report this income on your tax return.   

If I didn't get a 1099-NEC or 1099-MISC, do I still need to report the income if it's less than $600?

@praxisknight 

 

[Edited 3/26/24 | 11:40 AM PST]


 

 

 

5 Replies
Employee Tax Expert
Mar 23, 2024 11:59:47 AM

It depends. Legal settlements are often taxable, depending on the type of settlement and would have been indicated in your settlement agreement.  Non-injury settlements are considered other taxable income. You should receive a Form 1099 if your settlement is taxable. You will be taxed on the income based on the tax bracket that you fall in and the federal income tax rates. 

 

Refer to the TurboTax article Are legal settlements taxable? for more information.

 

If you receive a form 1099-MISC, follow the instructions below to enter your settlement income:

 

  1. Sign in to your TurboTax account
  2. Type 1099-MISC in the search box
  3. Select Jump to 1099-MISC
  4. Select yes to enter a 1099-MISC or Add another 1099-MISC
  5. Enter the information and select Continue
  6. When you get to the Describe the Reason for this 1099-MISC enter Lawsuit Settlement and select Continue
  7. When you get to the Does any of these uncommon situations apply? Select This was money from a lawsuit settlement and answer the question regarding back wages and select  Continue.

 

For additional information, review the TurboTax help article Where do I enter an award from a taxable legal settlement?

Level 2
Mar 23, 2024 3:29:18 PM

No matter what the amount of the settlement check will a MISC-1099 will be sent out (because it is a small check)?  I want to make sure I know if I need to put this on my taxes.

Employee Tax Expert
Mar 24, 2024 7:15:17 AM

As SharonD007 mentioned, legal settlements are often taxable.  Non-injury settlements are considered other taxable income. Normally companies do not issue a Form 1099-MISC for payments under $600, but you should still report this income on your tax return.   

If I didn't get a 1099-NEC or 1099-MISC, do I still need to report the income if it's less than $600?

@praxisknight 

 

[Edited 3/26/24 | 11:40 AM PST]


 

 

 

Level 3
Mar 30, 2025 10:23:22 AM

I have the same question. I don't see an 'Other Income' entry spot to put this small settlement check and I didn't receive a 1099-Misc. Where to put this amount?

Employee Tax Expert
Mar 30, 2025 12:15:21 PM

To enter the settlement:

 

  1. Go to Wages & Income
  2. Scroll to the bottom under Less Common Income, select Start (or Update) for Miscellaneous Income.
  3. Choose Other reportable income 
  4. Answer Yes to Any Other Taxable Income
  5. On the next screen enter the description and amount

Your settlement will now get reported as Other Income on your tax return.  Feel free to reach back if you have any other questions.  

 

 


@MG26