Include a “No-1099” Provision in Settlement Agreements

Why You Should Include a “No-1099” Provision in Settlement Agreements

At the recent annual conference of the Society of Settlement Planners, one of the presenters suggested adding a provision regarding Form 1099s to settlement agreements.

Defendants or their insurers will often send plaintiffs a 1099, even though the underlying claim is for personal physical injuries (and therefore should not be sent a 1099).  Your client (or you) then has to contact the defendant and rely on their cooperation and good will to remedy this problem.

However, rather than having to rely on the cooperation of the defense, plaintiff attorneys should include a provision in the settlement agreement stating that the defendant agrees not to send a 1099 to the plaintiff.

An example of such a provision is as follows:

“All sums set forth above constitute compensatory damages paid on account of personal physical injuries or physical sickness, arising from an occurrence within the meaning of Section 104(a)(2) of the Internal Revenue Code of 1986, as amended. Therefore, neither the defendant nor any of its insurers shall send an IRS Form 1099 to the plaintiff for any amount paid under this agreement.”

If you include a “no-1099” provision and the defense sends a 1099 to your client, rather than having to rely on the cooperation of the defense to fix the problem, you can indicate that the defense acted in violation of the settlement agreement.  This should make it easier to remedy an incorrectly sent 1099.

It should be noted that the above provision complies with the instructions for Form 1099-MISC, which state the following: “…[D]o not report damages (other than punitive damages) … [r]eceived on account of personal physical injuries or physical sickness.”[1]  Similar language is also found in the IRS Publication “Lawsuits, Awards, and Settlements Audit Techniques Guide” found on the IRS website.[2]


[1] https://www.irs.gov/pub/irs-pdf/i1099msc.pdf
[2] https://www.irs.gov/pub/irs-utl/lawsuitesawardssettlements.pdf

Need Help with a Settlement?

LET US HELP YOU

Click through the slideshow below to find other
articles from our e-Newsletters.

  • Liability Medicare Set Aside

    October 2017 Update on Liability Medicare Set Asides

    Over the past several months, plaintiff attorneys and the settlement planning community have anticipated that the Centers for Medicare and Medicaid Services (CMS) would be publishing some sort of guidance regarding Liability Medicare Set Aside Accounts (LMSAs) and No-Fault [...]

  • Healthcare and ERISA Lien Resolution Solution

    Healthcare and ERISA Lien Resolution Solution

    One of the most common questions we receive is about how to deal with healthcare and ERISA liens. As you know, resolving liens is often one of the most frustrating and time-consuming aspects of your cases. We’re excited to announce [...]

  • Protect your clients from “cash now” companies

    Protect Your Clients from “Cash Now” Companies

    As a personal injury attorney, you hate it when your former clients that are receiving structured settlement annuity payments are targeted by the “cash now” companies we all see on TV.  All of the planning done at the time of [...]

  • Include a “No-1099” Provision in Settlement Agreements

    Why You Should Include a “No-1099” Provision in Settlement Agreements

    Why You Should Include a “No-1099” Provision in Settlement Agreements At the recent annual conference of the Society of Settlement Planners, one of the presenters suggested adding a provision regarding Form 1099s to settlement agreements. Defendants or their insurers [...]

  • Lessons from the Powerball

    Lessons from the Powerball

    Lessons from the Powerball On Jan. 14, 2016, it was announced that winners from three different states will share the largest Powerball jackpot ever - $1.6 billion. After the winners finish celebrating, they will have an important choice to [...]

  • Rule 11 Language

    Rule 11 Language

    Proper Rule 11 language will allow your client some breathing room after mediation to develop a personalized settlement plan, and permit them to choose which annuity companies or trust companies, if any, will be used to fund their future payments. [...]

  • Top Attorney Malpractice Pitfalls in Personal Injury Cases

    Top Attorney Malpractice Pitfalls in Personal Injury Cases

    There's a lot to remember when you're dealing with a personal injury case.  At Amicus, we see some of the common mistakes made by attorneys, and we want to help you avoid those same mistakes.  This articles lists some [...]

  • ABLE Accounts: Another Option for Clients on Medicaid and SSI

    Utah Association for Justice Conference Follow Up

    It was great to see and speak with many of you at the recent UAJ annual conference. We appreciate our relationship with the UAJ and are happy to sponsor that event each year. It’s always interesting to see what questions [...]

  • New Attorney Joins the Amicus Team

    New Attorney Joins the Amicus Team

    Amicus Settlement Planners, LLC is pleased to announce the addition of Daniel Maxwell, to the firm. Daniel recently graduated summa cum laude from Creighton University School of Law and passed the Utah State Bar exam. He will be working with Amicus’ settlement [...]

  • Improving Your Case Intake Form for Smoother Settlements

    Improve Your Case Intake Form for Smoother Settlements

    Injury victims are increasingly relying on government programs like Medicaid, SSI, and Housing Benefits in order to make ends meet and get the medical care that they need. Clients often fail to inform their attorneys about the government benefits that [...]