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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 14444
Experience:  15years with H & R Block. Divisional leader, Instructor
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If a person wins a settlement and was issued a check for part

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If a person wins a settlement and was issued a check for part of the awarded monies and the other portion went to the attorney for fees incurred how would I file the 1099 that the company who was sued issued to me. When they issued the monies they issued 2 separate checks. One for me and one for the attorney.

Robin D :

Hello and thank you for using Just Answer,

Robin D :

The total on the 1099, does it have the attorney share listed too.

Robin D :

The system advises that you are online. Could you respond please if you are?

Robin D :

I will go with the assumption that the attorney's portion is showing on your 1099 along with your portion.

Robin D :

You are allowed to deduct legal fees related to producing or collecting taxable income or getting tax advice. You would show these fees that were paid to the attorney on Schedule A. They are subject to the 2% AGI floor. This means that the fees that are more than 2% of your Adjusted Gross Income will be the amount that will be used to add to all the other Schedule A items. If you do not itemize your deductions you will not be allowed to subtract the legal fees from the 1099 amount.

Robin D :

Hi

Robin D :

I will give you a moment to read then you can follow up if you have a question.

Robin D :

Were you able to view the entire post from me?

Customer:

Thank you so much for this information. The 1099 does show that the gross proceeds were paid to an attorney but the company issued my portion to me in a check from their company. So I should be able to file through the IRS E-Z file as long as I go with the long form. Otherwise I should go to a person who specializes in this field and have them complete my taxes this year.

Robin D :

What was this payment made to you for? Did you sue because you were injured?

Robin D :

Not all awards from court proceedings are taxable.

Customer:

It was wrongful termination and defammation of character. They had to change my termination to resignation and I was awarded the back wages that was due me plus some for pain and suffering. $5,000.00 of this was for back wages which I received a normal W-2, but the amount of $20,000 was paid to the lawyer on a 1099-Misc, which I was only issued $8,000 of that. The W2 I agree with and understand that but the 1099 is confusing to me.

Robin D :

The 1099MISc would have been for the pain and suffering portion because only the back wages could be reflected on the W2.
The 1099 portion is taxable to you and you will need to enter this a s other income. The portion that was paid to the attorney you would enter on the Schedule A. You say but the amount of $20,000 was paid to the lawyer on a 1099-Misc this sounds like you did not receive a 1099 in your name but the attorney did.
If that is the case then you need only add the $8000 to your Other Income (line 21) and that is it.

Robin D :

If you did receive the 1099 in your name then you use the Schedule A.

Robin D :

On the Schedule A you enter the amount that was split with the attorney from the Schedule A.

Robin D :

Using the schedule A is only done if you received the 1099 and the $20000 was on the 1099 (looking like you were paid the whole amount).

Customer:

Wonderful, because the 1099 Miscellaneous income was written out with my name on it and my SS # XXXXX XXXXX it as well so I believe that they issued it to me, but with the notation in box 14 Gross proceeds paid to an attorney. So if I am understanding you correctly the only amount I will have to declare and pay taxes on is the 8,000.00 as long as I file a Schedule A?

Robin D :

You need to use the Schedule A if they have the entire amount on the 1099 even if in box 14. They should not have issued the 1099misc to you with the amount in box 14, you are not the attorney. They actually should have listed in it box 3 and then you just use the Schedule A to deduct for the attorney.

Robin D :

If the company will not issue a corrected 1099MISC then you need to enter the total on the line 21 of the 1040 and then use the Schedule A to report the amount paid to the attorney from the $20,000.

Customer:

Thank you very much for your responses. They are very informative and I will contact them to ask them to correct their error. Thank you again and have a great day.

Robin D :

Your positive rating is always thanks enough.

If you could also participate in the very short survey that Just Answer will send you by e-mail I would appreciate that very much.

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