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?”  

 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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