Oak Park, MI asked in Civil Litigation and Tax Law for Ohio

Q: I received a settlement from my former employer through litigation for wrongful termination.I received a w2 for the

Portion that wasn’t taxed with the understanding that I have to Pay the taxes myself on this portion. However, I also received a 1099Misc for the portion that was sent directly to my attorney for their fees. This money never touched my hands and I assume my attorney also received the same 1099MISC. Is the one I received for the attorneys fees just for informational purposes? I don’t assume the government gets paid twice on the same chunk of money. Especially since I didn’t receive the benefit of the money. It’s income to the attorney. How do I file this or do I file this?

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1 Lawyer Answer
D. Mathew Blackburn
D. Mathew Blackburn
  • Tax Law Lawyer
  • Englewood, CO

A: You report the 1099-Misc on your return and create a counter entry reducing the amount and add a note stating that the income was reported as a W-2.

Keep all your records. There's a very high chance you'll receive a letter from the IRS in 2 - 2.8 years adding the 1099-Misc back in as income an stating you owe back taxes, interest, and penalties. Then you'll have to provide the documentary evidence showing that you filed your return correctly and the IRS doesn't know what it's doing.

Ohio only requires 1099's to be filed with the state if state tax was withheld so you shouldn't have an issue with them since they didn't get a copy.

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