Question

Are Class Action Lawsuit Settlements for Data Breaches considered the same as Wages?

Forum|Forum|1 year ago
April 1, 2025
1 reply
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I know Class Action Lawsuit settlements for Data Breaches and overcharging insurance premiums are taxable. I'm disabled and I'm only on Social Security Disability Benefits (SSDI). I don't file State and Federal Taxes because my income is below the taxable $25,000 threshold. If I receive a 1099-Misc form for the settlement amount awarded, how does that affect my SSDI? Is this considered Wages like working at a job? There's no clear-cut answer regarding this on the IRS website.

Thanks,

Not A Product Question

V

Vanessa A

Yes, it is taxed the same federally as wages are, however, it is reported as Other Income and not subject to Medicare and Social Security Taxes.

How it affects your SSDI taxability, will depend on how much you receive. It is possible that it can make your benefits up to 85% taxable.

If you fall into the following, 85% of your social security is taxable income