What exactly is a 1099 ? Important !?

Question

I recieved a settlement through a company for wrongful termination..It was less than 20k. Will the company have to send me a 1099 with my W2 and if they do Not send it....what do I do come tax time when I must file my taxes ? There was no taxes taken out of the settlement !

Answer 1

Your company may report the $20K on your W-2 form, but I doubt it. They will most likely issue you a 1099 form which is a form that is generally used to report income other than wages.

If they do not issue you a 1099 or include the $20K on your W-2, this does not relieve you of the responsibility for reporting this amount as income. Make sure to attach an explanation to your income tax return that explains where the $20K came from and what it was for if they don't include it on a 1099 or a W-2. This will save some time and hassle when the IRS is trying to match your income to what was reported and they find you are reporting 20K more.

Answer 2

Such as settlement is fully taxable. Only settlements for physical injury or illness or settlements that make you whole again (such as a damage settlement for the repairs to your car after an accident) are not taxable.

Since they didn't take any taxes out you should receive a Form 1099 reflecting the payment sometime after the end of the year. Even if you receive nothing from them, the settlement is taxable and you MUST claim it on your tax return(s). You do not have to have a 1099 in your hand to file a return since you do not attach it to your return. Just list the amount on the Other Income line on your tax return.

Answer 3

A part of settlement amount may be taxable and a part may not be taxable. You must report it even if you don't get 1099.
1. Physical injuries or physical sickness settlements are generally non-taxable if you did not take an itemized deduction for medical expenses related to this injury in prior years.
2. Interest, punitive damages, emotional distress or mental anguish, and employment discrimination or injury to reputation settlements are generally taxable.
3. Loss-of-use or loss-in-value of property settlements may be taxable if the settlement exceeds your basis in the property.

Publication 4345. Settlements — Taxability
www.irs.gov

Answer 4

A notable use of Form 1099 is to report amounts paid to independent contractors (in IRS terminology, such payments are nonemployee compensation). The ubiquity of the form has also led to use of the phrase "1099" to refer to contractors themselves. U.S. tax law requires businesses to submit a Form 1099 for every contractor paid more than $600 for services during a year. This requirement usually does not apply to corporations receiving payments.

Answer 5

If you have a lawyer, it may come through the law office, but it sounds like it will be taxable.

If you don't receive it, check on the irs website, it's delayed due to congressional posturing on the amt tax, but it should have an update here when they catch up.
http://www.irs.gov/newsroom/article/0,,id=106530,00.html

Answer 6

depending on your tax rate, hope you have some of that 20k in the bank to pay the tax on it.

now i have a question....were you supposed to pay taxes on it at the end of the quarter you received it so as to comply with the 90% or 100% rule?

also, bostonian brought up that it does not "make you whole"...why not?

Answer 7

It is a statement of income paid to you other than wages. The most common one most people see is to report bank interest on savings accounts.

Answer 8

a form for income you receive that has not had taxes withheld and is not 'earned'. yes, you will get one in the mail by Jan. 31.