how to report a legal settlement without a 1099

If you didn’t receive a 1099-MISC, and you received a taxable legal settlement:

1. Open or continue your return.
2. Navigate to the lawsuit settlement section:
   • TurboTax Online/Mobile: Go to lawsuit settlement.
   • TurboTax Desktop: Search for lawsuit settlement and select the Jump to link.
3. Answer Yes to the question Any Other Taxable Income?
   • If you've already entered miscellaneous income, select Add Another Miscellaneous Income Item.
4. Enter a brief description and the amount you received and select Continue.

See this help article for more information about entering a legal settlement in TurboTax. If only part of the settlement is taxable, enter the entire amount of received and then make a separate entry of a negative amount and name it "nontaxable portion of settlement".

Whether and how much of the amount of a legal settlement is taxable depends on the type of settlement proceeds you received and what they represented. Since you received a Form 1099, it should be accounted for on your tax return, as the IRS information return matching program will be looking for it.

Check the terms of the legal settlement. If you received punitive damages, this would be taxable income. 

Property settlements that compensate for a loss in value of your property that are less than the adjusted basis of your property are not taxable and generally do not need to be reported on your tax return. However, you must reduce your basis in the property by the amount of the settlement. If the property settlement exceeds your adjusted basis in the property, the excess is income. 

See IRS Publication 4345 for more information about legal settlements.

Legal fees related to personal issues typically can't be included in your itemized deductions under current law. See this tax tips article for more information.