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PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4105
Experience:  35 years tax experience, including four years at a Big 4 firm.
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I received a 1099 misc legal settlement distress originating

Customer Question

hello i received a 1099 misc for a legal settlement for emotional distress originating from a personal physical injury or physical sickness. My understanding from the IRS code is that this is not taxable. If it is reported on a 1099 how do I show this on my taxes...or do I need to show this on my taxes
JA: Thanks. Can you give me any more details about your issue?
Customer: I was unlawfully terminated. The harassment led to serious depression resulting in medical care. I filed a suit. They settled. As agreed in the settlement I received a w-2 for lost wages and a 1099 misc for emotional distress from a physical sickness.
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Submitted: 10 months ago.
Category: Tax
Expert:  PDtax replied 10 months ago.

Hi from just answer. I'm PDtax. I'll assist.

Since you received a 1099-misc for some or all of your award, it has to be reported received on your 1040. Then you can report it as nontaxable, leaving $0 taxable income to computer a tax.

Expert:  PDtax replied 10 months ago.

Line 21, other income, is where you report the 1099 amount. This allows IRS to match your reporting with the 1099 they received.

Note, you need to report a corresponding negative for the same amount.

Expert:  PDtax replied 10 months ago.

Form 1040, line 36 is where you report the deduction to report in net what you believe to be the taxable portion of your settlement.

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