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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28093
Experience:  Taxes, Immigration, Labor Relations
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received a 1099 with $$ in box 3 for settlement for a wrongful

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received a 1099 with $$ in box 3 for settlement for a wrongful death. I have to show that on the tax return but it shouldn't be taxed, how do I show it coming back off and where. thank you

LEV :

Hi and welcome to Just Answer!

LEV :

First of all, the settlement for a wrongful death should not be reported on the form 1099 because it is not taxable. You may contact the payer and ask to amend the 1099 form.


You do not need to report not taxable income on your tax return, but because it was reported - the IRS expects it to be included into your income – as a practical matter - to avoid IRS letters - add a note to your tax return with explanation why you think it is not taxable. You do not need to send any supporting documents - but keep them for your record.


First of all, the settlement for a wrongful death should not be reported on the form 1099 because it is not taxable. You may contact the payer and ask to amend the 1099 form.


You do not need to report not taxable income on your tax return, but because it was reported - the IRS expects it to be included into your income – as a practical matter - to avoid IRS letters - add a note to your tax return with explanation why you think it is not taxable. You do not need to send any supporting documents - but keep them for your record. Let me know if you need any help.

Customer:

I am showing the amount on the other income line (21) however I am including a supporting statement showing the amount on the 1099 and then it being subtracted back off and why. Is this sufficient. I called the law firm and they said according to their accountant they have to issue the 1099 in order to account for their expenses.....they will not amend the 1099.

LEV :

Please see instructions for the form 1099-misc - http://www.irs.gov/pub/irs-pdf/i1099msc.pdf page 4 right column - Do not report damages (other than punitive damages): a) Received on account of personal physical injuries or physical sickness;


So the law firm informed you incorrectly and you may file a complain to the IRS if you want.


As a practical matter - as long as that is not taxable income - do not report that amount on the line 21 but instead attach the statement with explanations.

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