Is a settlement payment reportable if the payment is going to the attorney and an individual? And do we put it under the attorney's tax ID number? Are all settlements reportable no matter whom they are paid to?


A settlement payment naming both the attorney and the individual on the check is reportable to both attorney and individual. On the attorney's 1099, the amount goes in box 14 and yes, it goes to the attorney with the attorney's tax ID number.

Also, according to IRS information officer Litton (ID#1002119), settlement payments arising from litigation that are paid to an escrow account (out of which the disbursement is made to pay the attorney fees and the settlement award to an individual) should be reported in box 14 of form 1099-MISC.

Settlement payments paid directly to an individual and attorney fees paid separately are also reportable on forms 1099-MISC. The fee to the attorney would be reported in box 7 and the total award to the individual (including attorney fees) would be reported in box 3 on the individual's 1099. Settlement payments for damage to personal property that are payable to the owner of the property as a result of an insurance claim are reportable on a 1099. (See IRS "Instructions for Form 1099-MISC")

Generally, all fee payments for $600 or more, and all gross proceeds payments to attorneys are reportable. Settlement payments to attorneys are in the "gross proceeds" category. If a settlement payment has the attorney's name on the check, whether alone or with a claimant, you must issue a 1099 to the attorney, reporting the total payment amount in box 14. If a settlement payment is made not to the attorney but to the claimant, they will generally be reported in box 3. These include punitive and compensatory damages.

Determining whether the payment is taxable depends on the type of damages. Taxable damages include back pay for missed wages, interest, and all awards other than physical injury and medical expense awards.

Do not report damages received on account of personal physical injuries or physical sickness, or that do not exceed the amount paid for medical care, or "received on account of nonphysical injuries (e.g. emotional distress) under a written binding agreement, court decree, or mediation award in effect on or issued by September 13, 1995."

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