1099-MISC for ERISA Settlement that is Tax Free

dea234
dea234 Member Posts: 2 Newcomer
in Filing my taxes

I received a 1099-MISC from an insurance company for a ERISA Settlement claim. The payments under the plan were tax free, and the settlement is as well. However, I received a 1099-MISC from the insurance company. How do I input this into Free Tax USA so there isn't a discrepancy with the IRS

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Answers

  • MatthewD
    MatthewD FreeTaxUSA Team Posts: 476

    Hello dea234,

    The first step is to call the insurance company and ask them to correct that error.

    However if they will not, there is an option. Enter the 1099-MISC and report it as Other Income on Form 1040. Then go to the Income menu under Uncommon Income and select Other Income. Down at the bottom of that page is the Miscellaneous Income options. Enter the amount as a negative amount with a description. That way it becomes a wash and $0 is reported as income.

  • dea234
    dea234 Member Posts: 2 Newcomer

    Thanks, Matthew.

    Wonderful and helpful answer. As a follow up, is it possible to attach documents to the e-file proving the deductions were after tax?

    It seems the only way right now is to file by mail and provide an explanation, but it would be more secure to simply attach old pay stubs once ready to efile.


    Thanks again!

  • MatthewD
    MatthewD FreeTaxUSA Team Posts: 476

    The software will only allow an attachment when it is triggered by the software. If you need to attach something the IRS needs to see, then Mailing your return is a better option.

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