Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 02-09-2018, 03:44 PM
Junior Member
 
Join Date: Feb 2018
Posts: 2
Received 1099-MISC for full payout after settlement of Class action lawsuit

Hello,
Back in 2009 I purchased house from a bank and found out that the bank didn't disclose a property tax refund check they received prior to escrow closing that I was entitled to part of it. Basically, they had to refund me about $1000 that they overcharged me. I was ignored by everyone and ended up suing them and became a class representative in a class action lawsuit. Finally in 2017 there was a settlement in which the bank agreed to pay about $250,000 total towards a settlement fund. The law firm received the 250K check in Jan 2017. The law firm got about $100K, there were some other fees, and admin costs of 40K, and I got a $3,500 as enhancement reward for being the class representative. I also got a $600 as my part of the fund for my share. That is I got $600 of the $1000 owed to me.
Last week I received in the mail a 1099-MISC with box 3 showing other income of $250,000.
If I just enter this 1099 into my tax return, it would yield more than $110,000 in tax liability...
Clearly the logical way is that I got $3,500+$600 - $1000 which is the basis here so about $3,100 as income. I totally ignore here the 8 years of lost interest on my $1000. Also, not sure how to quantify all my time spent, miles driven to depositions, etc as expenses incurred by me during this long process.
How do I enter this into my tax return without getting an IRS Audit, and all the hustle that would come with it.
Sorry for the lengthy note.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 02-10-2018, 05:47 AM
Moderator
 
Join Date: Oct 2010
Posts: 5,258
you need to report the whole amt on your 1040 line 21 as other income and need to report expenses, i.e., money sent to the law firm or other expenses etc, on sch A of 1040. So unless you itemize your deductions on SCh A of 1040 as misc deduction you can not claim those expenses on your return.for more professional help please contact an IRS Enrolled Agent/a CPA doing taxes in yourlocal area



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #3 (permalink)  
Old 02-10-2018, 03:08 PM
Junior Member
 
Join Date: Feb 2018
Posts: 2
Quote:
Originally Posted by Wnhough View Post
you need to report the whole amt on your 1040 line 21 as other income and need to report expenses, i.e., money sent to the law firm or other expenses etc, on sch A of 1040. So unless you itemize your deductions on SCh A of 1040 as misc deduction you can not claim those expenses on your return.for more professional help please contact an IRS Enrolled Agent/a CPA doing taxes in yourlocal area
Wnhough, Thanks for your response.

Just to clarify, I think/claim that the 1099 with that amount is a mistake and/or attempt by the bank to "get back" at me.
I sued the bank behalf of a class, for the amount of $1000. I didn't seek any other damages or compensation or other punitive damages. This ended in a settlement in which funds were paid to it, not to me. I got $600 instead of getting $1000 which is my tax basis here. (I didn't even recover the $1000) However, as part of the settlement, they paid me an award or enhancement payment of $3500.
This is very different than me suing the bank for punitive or other damages or compensation and getting settlement of $250,000 in which has attorney fees and other expenses in common ranges of 30-40%. For ex. Say I would get $250,000 check and law firm get about $100,000 resulting in me getting gross income of $250,000 and a net of $150,000...

I've read about much larger class action settlements of $10M in which the class representative received $10,000 reward. I will be shocked if that class representative got a 1099-MISC for $10M dollars....



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #4 (permalink)  
Old 02-11-2018, 08:18 AM
Moderator
 
Join Date: Oct 2010
Posts: 5,258
Quote:
Originally Posted by Laker4ever View Post
Wnhough, Thanks for your response.

Just to clarify, I think/claim that the 1099 with that amount is a mistake and/or attempt by the bank to "get back" at me.
I sued the bank behalf of a class, for the amount of $1000. I didn't seek any other damages or compensation or other punitive damages. This ended in a settlement in which funds were paid to it, not to me. I got $600 instead of getting $1000 which is my tax basis here. (I didn't even recover the $1000) However, as part of the settlement, they paid me an award or enhancement payment of $3500.
This is very different than me suing the bank for punitive or other damages or compensation and getting settlement of $250,000 in which has attorney fees and other expenses in common ranges of 30-40%. For ex. Say I would get $250,000 check and law firm get about $100,000 resulting in me getting gross income of $250,000 and a net of $150,000...

I've read about much larger class action settlements of $10M in which the class representative received $10,000 reward. I will be shocked if that class representative got a 1099-MISC for $10M dollars....
in general, aslongas the 1099 is incorrect or has been issued in error, yu need to contact the payer; unless you can get the form corrected correctly, you need to attach an explanation on your return and report the correct income on your return. When you contact the sender you need sen d a letter via certified mail.you might need it to support your stmt that you try to resolve th e issue with the payer.as said previously, the IRS wants you to report the whole amt on your 1040 line 21 as other income



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply



Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Lawsuit Proceeds and 1099-MISC APerson Income 2 06-12-2017 04:57 PM
Proceeds From a Class Action icewing726 Capital Gains 1 04-23-2016 02:28 PM
1099-MISC from lawsuit settlement TooShort665 For 2013 2 02-04-2014 02:15 PM
Lawsuit settlement 1099-misc...how to report/offset? mdonato Income 0 02-15-2011 05:58 PM
1099 and w-2 received for settlement hackerfoto Income 1 02-15-2011 03:40 AM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning
 
 
 

» Recent Tax Q&A
No Threads to Display.