For TAX purposes, is this a lawsuit?
April 16, 2016 3:41 PM   Subscribe

On my tax forms, do I report the $$ from this transaction (a refund, essentially, very little) as money from a "lawsuit" even if no court papers were filed?

I hired a lawyer, but no legal papers were filed. The case was settled between the lawyers, and my lawyer's fees were paid by the other party. I got the money that I paid the other party refunded to me, and I returned the product.

It's essentially a forced refund... but... is it a "lawsuit" for tax purposes (1099-MISC)

There was definitely an agreement/statement that was signed by all parties, but no court documents as far as I know.
posted by RaRa-SpaceRobot to Work & Money (9 answers total)
Which tax form and line are you referring to? Are you saying that you received a 1099-MISC from somebody, or are you trying to fill one out?

I wouldn't expect that a refund of money paid for goods or services would be taxable income.
posted by xil at 3:49 PM on April 16, 2016

Talk to a CPA.

You may have to consider sales tax implications if you bought it in a year where you also claimed a deduction on sales tax.
posted by tilde at 4:00 PM on April 16, 2016

xil: I received one from somebody.
posted by RaRa-SpaceRobot at 4:28 PM on April 16, 2016

This sounds like a refund (negotiated, with lawyers, but still a refund). No lawsuit means no lawsuit.
posted by zippy at 4:36 PM on April 16, 2016

Unless they actually gave you a 1099, This is not income. You returned an item for a refund.
posted by AugustWest at 5:23 PM on April 16, 2016

I received a 1099 in the mail from them. This is why it's confusing... it was definitely a refund of a purchase (but I had to argue for the refund). Can I ignore the 1099?
posted by RaRa-SpaceRobot at 5:47 PM on April 16, 2016

Your question provides no information about the type of claim that was involved.

Someone sending a 1099 means only that money changed hands. It does not establish that that money is taxable income.
posted by yclipse at 5:51 PM on April 16, 2016

IANYTA (tax advisor). One thing I've seen people do when they've gotten a 1099 for something that wasn't income was attach a statement showing the income and then backing it out so that it nets to zero, with an explanation below that of why it isn't income. The theory is that that might prevent an automatically generated notice.
posted by jpe at 6:30 PM on April 16, 2016

A negotiated refund should not be taxable, even if you had to bring suit to get it. What might be taxable is your attorney's fees, depending on the kind of lawsuit it was.
posted by praemunire at 7:40 PM on April 16, 2016 [1 favorite]

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