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.
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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.
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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.