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Settlement payment for breach of contract
January 23, 2024
Q. Are settlement payments to a vendor for breach of contract 1099 reportable?
A.
(Answered by IOFM's third-party tax experts)
The specific language of the settlement agreement should be examined to determine whether the payment is taxable income (and for that reason Form 1099 reportable) for the claimant, but in many instances a payment of legal damages to a vendor for breach of contract is reportable because it's a payment in lieu of business income the vendor would otherwise have…
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