I received a settlement check from a company for lost wages, and was given a 1099 for 2019. The check itself was for about $2.3k USD, and included a breakdown that didn't make sense to me and showed on the 1099 for ~$750 USD for the wages section. The actual check is for about ~$1900.

I've never received a settlement, but the total amounts here don't make sense to me. The lawyer's fee was taken out of the overall settlement, and it showed that taxes for federal/state etc. were removed, but the math doesn't really add up.

If the 1099 shows the $750 as wages, is my money already taxed? Is it just the amount of wages lost that was taxed and the rest is emotional damages (or whatever)? I wasn't a main plaintiff (class action), so I don't have a lawyer to relate to on this.

What sort of taxes should I look for on a lost wages and more on a settlement check?

My goal is to not owe next year (or owe more than I otherwise would have due to this).

  • Does the 1099 show anything for 'Federal Income Tax Withheld' (Box 4)? Is the non-wage portion identified anywhere as punitive damages? – Hart CO Feb 11 at 19:54
  • @HartCO No, it just shows ~$750 in the top box. I'll take a picture (and omit some items) when I get home. – Anoplexian Feb 11 at 20:20
  • You may want to recheck the settlement notice to see how claims were going to be processed and paid. Was this settlement based on actual lost wages owed to you? – pboss3010 Feb 11 at 20:35
  • @pboss3010 It was a settlement for unpaid overtime and breaks not being paid by the company, plus additions for not doing so. None of the tax matters were in the settlement notice. – Anoplexian Feb 11 at 21:32

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