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The 2006 tax year is closed as far as amending returns.
If the expenditures you made because of the suit were related to payroll, ie. the settlement expenditures & legal costs, then I would consider filing a business schedule C for those years by amending your 2007 & 2008 returns. The statute of limitations on 2007 will expire in 2011 on the comparable date in 2008 that you filed your return for 2007, including extensions, or 4/15/2008 if you filed your return before 4/15/2008.
You'll need to tell me a little more about the nature of the suit and settlement before I can give you my final recommendation as to what to do............