Tax Treatment of Class Action Settlement for SEC Violations

Forum|Forum|3 years ago
May 19, 2022
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I recently received my share of the settlement of an SEC enforcement action against TIAA-CREF (https://www.sec.gov/news/press-release/2021-123).

How is this characterized for tax purposes? The cover letter merely stated that it was for "payment plus interest, based on the calculations approved by the regulators." At the very least, I assume that the interest is taxable, but how do I determine what amount to use -- do I just wait until next January and hope that I get a 1099-MISC?

I understand that the general rule is, "to determine if settlement amounts you receive by compromise or judgment must be included in your income, you must consider the item that the settlement replaces," but I have no idea what "disgorgement, prejudgment interest, and a civil penalty" might "replace"?

Not A Product Question

leeloo

Since this is 2022 income, you would definitely wait until next year to include it. You may receive a 1099 reporting form. If not, it is entered as other income.

https://www.irs.gov/pub/irs-pdf/p4345.pdf