How to report a legal settlement for stock in IRA?
I just received a check for a legal settlement for a stock I used to own in my IRA. I plan to use the proceeds for household expenses. How and where do I report this taxwise? Thanks.
I just received a check for a legal settlement for a stock I used to own in my IRA. I plan to use the proceeds for household expenses. How and where do I report this taxwise? Thanks.
Permalink Submitted by Alan Spross on Fri, 2008-12-26 22:38
Due to a complete lack of uniformity in how the plaintiff’s bar is handling tax reporting, you will have to either check the settlement data you were provided or wait to determine what form your settlement is reported on. It could be a 1099R or a 1099 MISC. Either way, you would have to report it as ordinary income on Form 1040 either on line 15 if a 1099R or write it in on line 21 if you get a 1099 MISC.
There could also be variations based on how the attorneys fees were handled. Try to find the tax provisions portion of the release you received.
Permalink Submitted by mm mouse on Fri, 2008-12-26 23:51
No 1099 came with the check; the attachment says to consult my tax advisor. Should I expect a 1099 after year end? Also, does the IRS get a copy of these 1099s? Thx very much.
Permalink Submitted by Alan Spross on Sat, 2008-12-27 04:54
Pretty sad that cousel cannot even provide basic tax info with your check given that the received the lions share of the settlement. I assume you checked the entire release carefully. Some of them are very long and detailed.
You would not get the 1099 with the check in almost all cases anyway, but no telling if you will get one in the first week of Feb. or not. This is putting your tax advisor on the spot without adequate information. If you receive a 1099, the IRS will also receive a copy.
If you get nothing further by mid February, I would suggest listing the funds as ordinary income on line 21, but you may also want to let your tax advisor (if you use one) carefully review the entire release.
Permalink Submitted by mm mouse on Sat, 2008-12-27 14:12
Alan,
Thanks so much for your help!