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PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4522
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: 1 year ago.
Category: Tax
Expert:  PDtax replied 1 year 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 1 year 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 1 year 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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