Individual A won $40,000 in a lawsuit and hired an Attorney who will receive $15,000 for Attorney Fees. Individual A will have a $15,000 expense to offset the $40,000 income. Individual A is an individual, not a Corporation, Trade or Business etc., and the $40,000 is not wages or any type of earned income. Questions: 1. Is sending a 1099 to the Attorney for the $15,000 necessary? 2. Is the $40,000 reported on Form 1040 line 21 Other Income? 3. Are there other places/options to report this income? 4. Will the IRS easily match the reported 1099 of $40,000? 5. Is there any other place to report the $15,000 expense paid to the Attorney? 6. What is the deduction proof for the $15,000 Attorney Fee? 7. Can a copy of the $15,000 Cancelled Check be attached with the tax return? 8. If a 1099 is sent to the Attorney for the $15,000, can it be attached to the tax return? 9. Is there a risk of the $15,000 Attorney Expense being classified as Wage or Earned Income? 10. Should the $15,000 Attorney Expense be reported on Schedule A line 28 Other Miscellaneous Deductions? 11. Can a worksheet showing the Attorney Paid Name etc. and the Expense be attached to show the offset of the $40,000 income on line 21 with Schedule A line 23? 12. Will reporting the $40,000 as described above clearly show it is not Earnings from work? 13. How does the Social Security Administration check for classification of earned income?

March 25th, 2024

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