Settlement taxable

Forum|Forum|2 years ago
March 23, 2024
1 reply
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I received a check from a Yahoo data breach settlement in 2023. Is this taxable? If so, how do I report it on my taxes?

Not A Product Question

Best answer by LeticiaF1

As SharonD007 mentioned, legal settlements are often taxable. Non-injury settlements are considered other taxable income. Normally companies do not issue a Form 1099-MISC for payments under $600, but you should still report this income on your tax return.

If I didn't get a 1099-NEC or 1099-MISC, do I still need to report the income if it's less than $600?

@praxisknight

[Edited 3/26/24 | 11:40 AM PST]

SharonD007

It depends. Legal settlements are often taxable, depending on the type of settlement and would have been indicated in your settlement agreement. Non-injury settlements are considered other taxable income. You should receive a Form 1099 if your settlement is taxable. You will be taxed on the income based on the tax bracket that you fall in and the federal income tax rates.

Refer to the TurboTax article Are legal settlements taxable? for more information.

If you receive a form 1099-MISC, follow the instructions below to enter your settlement income:

Sign in to your TurboTax account
Type 1099-MISC in the search box
Select Jump to 1099-MISC
Select yes to enter a 1099-MISC or Add another 1099-MISC
Enter the information and select Continue
When you get to the Describe the Reason for this 1099-MISC enter Lawsuit Settlement and select Continue
When you get to the Does any of these uncommon situations apply? Select This was money from a lawsuit settlement and answer the question regarding back wages and select Continue.

For additional information, review the TurboTax help article Where do I enter an award from a taxable legal settlement?

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praxisknightAuthor

No matter what the amount of the settlement check will a MISC-1099 will be sent out (because it is a small check)? I want to make sure I know if I need to put this on my taxes.