Question on 1099 - MISC form and PI settlement

[Redemptionman]

Jurisdiction

Mississippi

If you have a PI settlement and receive a 1099 - MISC for that amount but it is not taxable due to the PI Settlement, do you have to report the amount on your taxes?

the form came into the recipient but is NOT TAXABLE due to Physical Injury statute. The form does not have the tax payers id on it but is made out to the firm who handled the case. Do you have to report this or in what way. They want a schedule C which is for businesses not personal and that treats it as income rather than settlement.

 

[Tax Counsel]

If you have a PI settlement and receive a 1099 - MISC for that amount but it is not taxable due to the PI Settlement, do you have to report the amount on your taxes?

the form came into the recipient but is NOT TAXABLE due to Physical Injury statute. The form does not have the tax payers id on it but is made out to the firm who handled the case. Do you have to report this or in what way. They want a schedule C which is for businesses not personal and that treats it as income rather than settlement.

There isn't a personal injury statute per se, but Internal Revenue Code (IRC) § 104(a)(2) excludes from gross income "the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal physical injuries or physical sickness;..."

As the U.S. Supreme Court has applied that section of the Code to the extent the settlement included only damages related to a personal injury (including medical bills, lost income, compensation for disability or disfigurement, damage to property, and pain & suffering) then it is not taxable income to you and under the Treasury regulations and tax return instructions you need not report on your tax return at all. That's why a 1099 was not sent to the plaintiff. However, the IRC does require that the insurer send a 1099 for the settlement to the attorney who represented the plaintiff to ensure the lawyer includes his/her contingent fee portion of the settlement as income on his/her return or the law firm's tax return.

 

[Redemptionman]

There isn't a personal injury statute per se, but Internal Revenue Code (IRC) § 104(a)(2) excludes from gross income "the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal physical injuries or physical sickness;..."

As the U.S. Supreme Court has applied that section of the Code to the extent the settlement included only damages related to a personal injury (including medical bills, lost income, compensation for disability or disfigurement, damage to property, and pain & suffering) then it is not taxable income to you and under the Treasury regulations and tax return instructions you need not report on your tax return at all. That's why a 1099 was not sent to the plaintiff. However, the IRC does require that the insurer send a 1099 for the settlement to the attorney who represented the plaintiff to ensure the lawyer includes his/her contingent fee portion of the settlement as income on his/her return or the law firm's tax return.

Yes, I know this already TC. The 1099 went to the wrong address, no 1099 is needed for the injured party. The 1099 would need to go to the law firm who handled the case? It had the wrong address on it and a correction has been requested.

I know what qualifies and doesn't qualify as far as tax ability of the settlement.

 

[Tax Counsel]

Yes, I know this already TC. The 1099 went to the wrong address, no 1099 is needed for the injured party. The 1099 would need to go to the law firm who handled the case? It had the wrong address on it and a correction has been requested.

I know what qualifies and doesn't qualify as far as tax ability of the settlement.

Yes, the 1099 should go to the lawyer/law firm that handled the case.

Please don't snipe at me for giving you information you already knew. I can't read your mind to divine what you know and don't know. So I provided information that I thought might be helpful. I don't see why getting more information than you wanted seems to irritate you but don't take your irritation out on me.

 

[Redemptionman]

Yes, the 1099 should go to the lawyer/law firm that handled the case.

Please don't snipe at me for giving you information you already knew. I can't read your mind to divine what you know and don't know. So I provided information that I thought mi

ght be helpful. I don't see why getting more information than you wanted seems to irritate you but don't take your irritation out on me.

Yes, the 1099 should go to the lawyer/law firm that handled the case.

Please don't snipe at me for giving you information you already knew. I can't read your mind to divine what you know and don't know. So I provided information that I thought might be helpful. I don't see why getting more information than you wanted seems to irritate you but don't take your irritation out on me.

Yes, thank you. I appreciate it and I realize I did not explain my request fully or correctly., It is me who should apologize.