Hello,
In 2024 I received a settlement from a legal action filed in 2023 from one of the credit bureaus for violations of the fair credit reporting act and the physical injuries that resulted from that violation. We settled for $120,000 and the check was sent to my attorney. After his legal fees of $54,303.60, I received a check from his office for $65,696.40. However, I received a 1099 for the entire $120,000 and my accountant says that I’m liable for $30,000 to the IRS and my state based on receipt of the $120k. How should the settlement proceeds be recorded on my return to accurately reflect what I received and what is taxable? Your feedback is greatly appreciated.