Do I have to report a non-taxable lawsuit settlement?

Forum|Forum|2 years ago
April 8, 2024
1 reply
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For SSI income, how and where do I file income for 1099 SSA-1099-RRB-1099?

Also need to know where to include a payment from a car accident, although it is not taxable income.

Thank you!

TurboTax Free Edition Online

Best answer by DawnC

You don't have to include non-taxable income on your tax return. Legal settlements are often taxable, but it depends on the type of settlement. The settlement type will be listed in your Final Settlement Agreement.

Physical injury or sickness settlements (dog bites, mesothelioma, etc.) are nontaxable and don't need to be reported unless you deducted medical expenses related to the injury on a previous tax return, and you received a tax benefit from the deduction. In that case, report the medical expenses related to the incident as miscellaneous (other) income.
Punitive damages (except certain wrongful death cases), and awards for employment discrimination and injury to reputation (libel, slander, or defamation) are taxable.
Emotional distress and mental anguish settlements are taxable (unless they're related to physical injury or sickness), but only on the amount above and beyond the undeducted medical costs for treatment of the distress or anguish. You'll need to paper-file your return so you can attach a statement that shows the settlement amount minus the (undeducted) medical expenses related to treatment.

Settlements—Taxability

If the proceeds you receive for emotional distress or mental anguish (pain & suffering) do not originate from a personal physical injury or physical sickness, you must include them in your income.

TomK2023

Did you receive some kind of tax form for this payment (e.g., 1099-MISC)? Or was this just a reimbursement check from your insurance company?

All SSA-1099 forms get entered in the same place:

Open (continue) your return in TurboTax.
In the search bar, search for the term Social Security benefits and then select the Jump to link at the top of your search results.
On the screen Did you receive Social Security or Railroad Retirement benefits in 20XX? answer Yes and select Continue.
On the next screen, check the box beside Social Security benefits (Form SSA-1099), then enter the amounts from your form(s) in the boxes provided.
- If you received multiple SSA-1099s, add up the amounts for each box and enter them together.
- Don't include SSA-1099s for dependents. Those should be reported on the dependent's return, but only if they are required to file a return (this is uncommon).
Select Continue and follow the on-screen instructions.

If jump to doesn't work, Click on Federal tab, and then Wages & Income. Scroll down Social Security (SSA-1099, RRB-1099) and click on Add/Edit.

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candycanecan100Author

I did not receive any form. It was for pain and suffering which is non-taxable. I just don't know if I must include it in my taxes and where.

DawnCAnswer

Employee

Physical injury or sickness settlements (dog bites, mesothelioma, etc.) are nontaxable and don't need to be reported unless you deducted medical expenses related to the injury on a previous tax return, and you received a tax benefit from the deduction. In that case, report the medical expenses related to the incident as miscellaneous (other) income.
Punitive damages (except certain wrongful death cases), and awards for employment discrimination and injury to reputation (libel, slander, or defamation) are taxable.
Emotional distress and mental anguish settlements are taxable (unless they're related to physical injury or sickness), but only on the amount above and beyond the undeducted medical costs for treatment of the distress or anguish. You'll need to paper-file your return so you can attach a statement that shows the settlement amount minus the (undeducted) medical expenses related to treatment.

Settlements—Taxability

If the proceeds you receive for emotional distress or mental anguish (pain & suffering) do not originate from a personal physical injury or physical sickness, you must include them in your income.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"