Tax question for OOT

[Luv2DriveTT]

In 2005 I won a legal settlement where each month money would be sent to my attorney's bank account in trust for me. He would then take out his legal fee and send me a check for the balance from his account.

1) Does my attorney send me a 1099? Even though the attorney holds the fee in trust, is that considered income for him as well?
2) Does the company I won the settlement from send me a 1099, or do they send the attorney the 1099?
3) My legal fees collected from the winnings are significantly large (1/3). Do I have to send my attorney a 1099?

Thanks for the tax advice OOT!

TT /images/graemlins/club.gif

shouldn't your attorney know this stuff?

[Luv2DriveTT]

[ QUOTE ]
shouldn't your attorney know this stuff?

[/ QUOTE ]

He advised me to ask OOT for the definitive answer /images/graemlins/smile.gif

TT /images/graemlins/club.gif

[beenben]

First off, although I'm a lawyer, I'm not a tax lawyer and I did not research this properly. I'm just giving you a semi-educated guess.

1) when the money is held in trust, it doesn't belong to anyone. However, when the attorney pays himself his fee, that is income because income is any benefit derived; and his 1/3 or whatever of your settlment is income to him that he or his firm are taxed on. But- if this is a worker's compensation or personal injury settlement, it is not taxable pursuant to 26 U.S.C.A. § 104.
(however, punitive damages are taxable).

I'm not sure who sends 1099 or if that's the right form, but I'm pretty sure you don't send one to your attorney.

[vexvelour]

Just go to H&R Block and explain your situation. They know everything. I had some f'ed up taxes last year because of an inheritance and [censored] and I just told my dude my story and he told me what he needed. Easy.