Class Action Settlement


Today TaxMama® hears from Michael with this earth-shattering question. “I received a small class action settlement ($3.50) from a class action against Classmates.com . Is this settlement taxable for IRS purposes?”  

Ask TaxMama

 Dear Michael,  

Sure, isn’t everything?  

Please be sure to remember to enter that income on Line 21 of your tax return.  

What happens if you don’t?

Nothing. 

Really, it’s too small to even remember. 

Uh…why didn’t I get any money? I paid them for a membership for a while.

And remember, you can find answers to all kinds of questions about settlements, and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

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One thought on “Class Action Settlement

  1. Tom Kelly says:

    Why would that be taxable income. If it was not a deduction it is not income when he gets it back. If anything, it is a reduction in the cost of the service. IMHO

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