How to Offset Non-Taxable 1099-MISC Settlement Income

Maverick
Maverick Member Posts: 2 Newcomer
in Credits/Deductions

I received a Form 1099-MISC for $5,000 as a lemon law settlement related to a defective personal vehicle. This amount was reported in Box 3 of the 1099-MISC.

According to IRS guidelines, this type of settlement is non-taxable if it simply reimburses me for a loss and doesn't exceed my original cost — which is the case here. However, since it was reported on a 1099-MISC, I understand it must still be reported on my return to satisfy IRS matching.

Here's what I need to do:

  • Report the $5,000 on Schedule 1, Line 8z (as required by the 1099-MISC)
  • “Non-taxable lemon law reimbursement – personal vehicle”

Question:

How can I enter this negative adjustment (Line 24z) in FreeTaxUSA? I don’t see a specific option for “Other Adjustments to Income” or a way to enter a custom adjustment with a description.

Please advise on the correct steps or menu path to accomplish this. Thank you!

Answers

Categories