If liquidated damages are not subject to FICA taxes, is an employer required to provide a Form 1099 to an individual who receives a legal settlement?
In general, a payer of damages, or its insurer, is required by section 6041 to report on Form 1099 when it makes payments of $600 or more, as a result of a judgment or a settlement. Generally, no information reporting is required for payments that are not subject to income tax. Thus there would be no reporting requirement for a payment of damages exclusively for physical injuries (with the exception of punitive damages, which are includible in income). See Internal Revenue Code section 104(a)(2).
