Taxes owed for class action lawsuit

Forum|Forum|1 year ago
February 7, 2025
1 reply
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Hello,

I was the lead in a class action lawsuit that paid out $300,000 but I received a 1099-MISC for the entire amount ($300,000) even though my portion (after attorney fees, etc.) was only $10,000!!!

How can I subtract the $290,000 from my taxes?

Thanks!

P.S. did they send me the 1099-MISC vs the attorneys and why didn't they break down things and send me just a $10,000 1099-MISC form?

Best answer by DaveF1006

The bank that lost the class action lawsuit issued the 1099-MISC. The attorneys received the lion share of the $300,000 and my portion was only $10,000! Why would I be liable to pay taxes on attorney fees? If that's the case, I would owe more money in taxes than my measly $10,000 portion!

I answered this issue in the other post that you created and mentioned to get a corrected 1099 MISC. That is you best option.

A second option would be is to report the 1099 MISC for the full amount and then exclude $290,000. This may run the risk of an IRS audit but you would prevail because you should not be responsible for attorney fees. Here is how to report.

Log into or open Turbo Tax
wages and income
Common income
Report 1099 MISC

Once this is complete, Go to:

Less Common income
Miscellaneous Income, 1099-A, 1099>start
Scroll to the bottom of the page to Other Reportable Income
Other taxable income, answer yes
Then give a brief description of the income and the amount listed..
Here describe this as offset attorney fees for 1099 MISC and list the amount as -$290,000. This will exclude $290,000 of taxable income from your return.