Question

Sexual harassment lawsuit settlement attorney's fee.

Forum|Forum|4 years ago
February 4, 2022
2 replies
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There was a settlement and the 1099-MISC included the attorney's fee. Can this fee be deducted? If so, how would it be done? Thank you for your time.

TurboTax Home & Biz Windows

B

Bsch4477

Employee

You could report other income with a minus amount that represents the attorney fees with the description “adjustment for attorney fees included in 1099-misc”

DaveF1006

Yes, according to this IRS source, you are not precluded from deducting attorney fees related to the settlement. Here is the best way to report this in Turbo Tax.

Go to federal>income and expenses>all income>>show more L
Less Common Income> Start
Miscellaneous Income,>start
Other reportable income>start
Next screen asks Any Other Taxable Income>yes
The next screen will allow you to report the income with a brief explanation. For the description, I would write 1099-MISC Lawsuit Settlement for Sexual Harassment then the gross amount that is listed on the 1099 MISC
Next a screen will appear that says Other Miscellaneous Income Summary. Here select Add Another Miscellaneous income Item.
Now enter Attorney Fees for Lawsuit Settlement for Sexual Harassment as a description. Now enter the dollar amount as a negative amount by -XXX.XX.
Doing this in following matter will provide the IRS with a complete description on what you are doing.

[ Edited 02/03/22|08:22 PM PST]

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M

Mike9241

@DaveF1006

https://www.irs.gov/newsroom/certain-payments-related-to-sexual-harassment-and-sexual-abuse

what you're citing above is for the business that lost the sexual harassment case.

https://www.irs.gov/newsroom/section-162q-faq

the above id for the recipient

Question:
Does section 162(q) preclude me from deducting my attorney’s fees related to the settlement of my sexual harassment claim if the settlement is subject to a nondisclosure agreement?

Answer:
No, recipients of settlements or payments related to sexual harassment or sexual abuse, whose settlement or payment is subject to a nondisclosure agreement, are not precluded by section 162(q) from deducting attorney’s fees related to the settlement or payment, if otherwise deductible.

If you sue an employer for sexual harassment and you are awarded a judgment, the amount isn’t taxable to the recipient provided the award was not based on compensation. If you sue the company and win a judgment — unless a portion of the judgment is for back pay or compensation — it is not taxable to the recipient. obviously, if the judgment is taxable the legal fees aren't deductible. contact your lawyer.