Quirky Question #200, Reporting Payments Under Settlement Agreements

Question: We try and settle threatened lawsuits with lump sum settlements which include wages, tort damages, reimbursement of medical costs and attorneys’ fees. We pay the lump sum to the employees’ attorneys (Trust fund), issue a 1099 to the employee for the amounts paid, not including attorney fees, and a 1099 to the attorney for the attorney fees. We require...