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Merlo
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i recvd a 1099-misc from a lawsuit settlement. part of the

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i recvd a 1099-misc from a lawsuit settlement. part of the out of court settlement was from lost wages which i recvd w-2 the rest and the vast majority of the monies paid to me are worded as non-wage damages which required the 1099-misc(Box 3). The settlement alleged discrimination, however my termination was facilitated when i called into work sick on doctors orders for high blood pressure and depression. I was terminated on the day i called in. Also, my atty was paid on a percentage of the settlement and was paid directly by my old employer

My question.. Do i claim the 1099 as taxable income? If not, do i include the 1099 on my return?
Submitted: 4 years ago.
Category: Tax
Expert:  Merlo replied 4 years ago.

HelloCustomer

 

Yes, this is considered to be taxable income to you and must be reported on your return.

 

The amounts you were paid should have been reported in box 3 of the 1099 form and you will report that amount on line 21 of your Form 1040 as "other income". If the amount reported to you on the 1099 form included the amount that was sent to your attorney, you may claim a deduction for the attorney fees on Schedule A of your itemized deductions as a miscellaneous deduction.

 

http://www.irs.gov/pub/irs-mssp/a9lawsut.pdf

 

 

If this was helpful please press the Accept button. Positive feedback is also appreciated.

 

Thank youCustomer/p>

 

 



Edited by Merlo on 2/6/2010 at 11:30 PM EST
Customer: replied 4 years ago.
Ok.. thank you for your answer. I was hoping i would not need to report the income due to it was not an accesion to wealth due to being out of work and not finding comparable employment. also, because of the claim of physical injury.
Expert:  Merlo replied 4 years ago.

HelloCustomer

 

If the settlement had actually been paid to you for physical injuries or physical illness, then that part of the settlement would not be taxable. But you said the settlement was for lost wages and also for alleged discrimination. Even though your claim may have involved a physical injury, if the settlement was not paid directly to reimburse you because of those physical injuries, then this is taxable income to you, and explains why you received the 1099 form. If the settlement had related directly to compensation for physical injuries, then a 1099 would not have been issued for that portion of the settlement.

 

You may, however, claim a deduction on Schedule A for your medical expenses.

 

If this was helpful please press the Accept button.

 

Thank youCustomer/p>

 

 

Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Merlo and 3 other Tax Specialists are ready to help you
Customer: replied 4 years ago.
FYI.. I called the IRS and showed them my settlement and initial lawsuit. They said I do not owe anything. To anyone reading these. If you have a tax question. Call the IRS and ask. They will tell you the answer and the documentation to back it up. I saved myself thousands of dollars......
Expert:  Merlo replied 4 years ago.

Customer,

 

I can only tell you what the law requires as far as taxes due on legal settlements.

 

Legal settlements which you receive as compensatory damages for a physical injury or illness are not taxable income. But settlements you receive for lost wages or for being out of work due to illness are treated as taxable income.

 

If you are confident with the information that you received from the IRS representative that you spoke to, then by all means those are the instructions you should follow. Just keep in mind that it would be far from the first time that an IRS phone representative gave out incorrect information. Unless of course, you gave them different information than what you provided here in this forum, which would change the outcome of the answer given.

 

 

 

 

 

 

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Merlo
Merlo
Tax Professional
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25+ years tax consulting. Specializing in returns for US citizens living abroad