Taxable Settlement Payment

[TAXNJ]

At this point, you might consider consulting with a Tax Attorney

[Burke]

I don't know how the 1099's work for these settlements, but I have always found the 1099's sent to everyone after the year ends. Not being a lawyer, I would like to know if it is customary for payer to send the 1099s before the year ends. I get the impression from his statement that he doesn't expect her or his firm to receive a 1099 because he hasn't received it yet. Do you know if this is customary? I know the check was made out to both of them and listed her social security number. I think she should get a 1099 for the total $19K.

As discussed in other threads, whether or not she got a 1099 from anyone is immaterial. Normally, they are sent at year-end because the IRS 1099 forms are not available for the prior year until then. Her attorney should have issued one to her. Obviously he is not going to. He should have received one marked "Payments to Attorneys" from the payee for the defendant (govt authorities). Again, that is immaterial as far as preparation of the client's return. The fact that the check had her SSN on it shows you something. It may have been reported to the IRS by other means (substitute 1099).)

[ruthc]

As discussed in other threads, whether or not she got a 1099 from anyone is immaterial. Normally, they are sent at year-end because the IRS 1099 forms are not available for the prior year until then. Her attorney should have issued one to her. Obviously he is not going to. He should have received one marked "Payments to Attorneys" from the payee for the defendant (govt authorities). Again, that is immaterial as far as preparation of the client's return. The fact that the check had her SSN on it shows you something. It may have been reported to the IRS by other means (substitute 1099).)

I agree with you Burke. I received a copy of the check and it was made out to the lawyer and her with her SS# on it. Although he wrote that he didn't receive any 1099 I know there should be one. He may not have received it now, it may show up after the year ends. I didn't know if it was normal for the lawyer to receive one this early. I also don't think he is going to give her a 1099 form. Although I am to the point of referring her to someone else, for my future reference, how would the taxable amount be entered on the 1040 form without one being issued and not knowing all the info for payer, etc?

Thanks so much everyone for all your information. It is so good to know that I can get feedback when I need it!!! It is greatly appreciated.

[TAXNJ]

….." Although I am to the point of referring her to someone else, for my future reference, how would the taxable amount be entered on the 1040 form without one being issued and not knowing all the info for payer, etc?...…".

See the 6-5-19 reply post:

If you are referencing the IRS publications, then you need to look further on the IRS website

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

[ruthc]

I can't believe the lawyer had no issue with having me read the original complaint and the settlement statements. I must say he has been very cordial and helpful. So now I can read these statements to see if I am able to tell if the proceeds will be taxable. If not, the client will have to be referred elsewhere. I did meet with the client yesterday to explain what has transpired and how to go forward. She does not want to go to another preparer. She would rather pay the taxes and be done with it. It would cost her more in the long run if she went to someone else. I am glad that she doesn't have any significant money issues, so I explained that I thought because I felt that it may be taxable, that it would be to her benefit to send in estimated payments which she agreed. She wants no problems with the IRS nor the state for such a small amount of money.

[TAXNJ]

I can't believe the lawyer had no issue with having me read the original complaint and the settlement statements. I must say he has been very cordial and helpful. So now I can read these statements to see if I am able to tell if the proceeds will be taxable. If not, the client will have to be referred elsewhere. I did meet with the client yesterday to explain what has transpired and how to go forward. She does not want to go to another preparer. She would rather pay the taxes and be done with it. It would cost her more in the long run if she went to someone else. I am glad that she doesn't have any significant money issues, so I explained that I thought because I felt that it may be taxable, that it would be to her benefit to send in estimated payments which she agreed. She wants no problems with the IRS nor the state for such a small amount of money.

You have much effort in this issue. The decision should not be based on what you “felt” rather what you know is the obligation the preparer has to the client. Since you are unsure where to place the amount on the tax return, how comfortable and knowledgeable are you to understand the legal document?

You might strongly consider consulting with a Tax Attorney to review the legal document.

[ruthc]

You have much effort in this issue. The decision should not be based on what you “felt” rather what you know is the obligation the preparer has to the client. Since you are unsure where to place the amount on the tax return, how comfortable and knowledgeable are you to understand the legal document?

You might strongly consider consulting with a Tax Attorney to review the legal document.

Please explain your comment. Imay have used the wrong term when I wrote "felt" rather than know. In her case, I KNOW it would be to her benefit to do the estimated payments. Where did I state that I didn't know where to place the amount on the tax return? I know where it belongs. If you made that remark due to my questioning the 1099M, I always entered the 1099M info in the proper place with the payer's name, ID, etc. If I don't know the payer's info, I wouldn't want to just enter the amount. I always want to enter all the info if possible.

[TAXNJ]

Please explain your comment. Imay have used the wrong term when I wrote "felt" rather than know. In her case, I KNOW it would be to her benefit to do the estimated payments. Where did I state that I didn't know where to place the amount on the tax return? I know where it belongs. If you made that remark due to my questioning the 1099M, I always entered the 1099M info in the proper place with the payer's name, ID, etc. If I don't know the payer's info, I wouldn't want to just enter the amount. I always want to enter all the info if possible.

Yes, your 6-4-19 & 6-13-19 posts asked where the amount should be on the return.

Again, you have much effort in this issue and compliments to you for that.

The point was that you might strongly consider consulting with a Tax Attorney to review the legal document unless you are comfortable and knowledgeable to understand the legal document.

Best of luck.

[Burke]

Although I am to the point of referring her to someone else, for my future reference, how would the taxable amount be entered on the 1040 form without one being issued and not knowing all the info for payer,
.

Based on addl info in your posts, it seems evident now that this payment was made in 2019. If a 1099 is issued, it will come in early 2020. You must know who the plaintiff was if you have the statement of settlement documents. I usually input the TYPE of income so it shows on Line 21, such as "Settlement Proceeds." I don't know what software you are using, but Line 21 info does not require a 1099 to put it on the tax return.

[ruthc]

Yes, Burke, my software has no problem putting the amount in other income. I figured the 1099M would come after year end. I never had anyone get one early in the year it was for, but didn't know if does happen. Thanks