Question

Can I report lost wages on a personal injury settlement without a 1099?

Forum|Forum|6 years ago
April 28, 2020
1 reply
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My attorney told me that my insurance company will not be issuing me a 1099 because "wage loss is paid at 85% under the theory that the other 15% is normal taxes that you would otherwise have to pay..." He's insisting that I don't need to claim any of my settlement... even the loss of wages portion based on this theory.

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GiseleD

You do need to report this income. Per this resource from the IRS:

"If you receive a settlement in an employment-related lawsuit; for example, for unlawful discrimination or involuntary termination, the portion of the proceeds that is for lost wages (i.e., severance pay, back pay, front pay) is taxable wages and subject to the social security wage base and social security and Medicare tax rates in effect in the year paid. These proceeds are subject to employment tax withholding by the payor and should be reported by you as ‘Wages, salaries, tips, etc.” on line 1 of Form 1040."

The payor should be issuing a W-2 for this settlement. Please reach out to your attorney if you haven't received one.

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