How do I report a confidential illness settlement?

Q: I received a confidential illness settlement last year. Is the settlement portion that is not back pay tax-exempt? If so how do I file my return? How do I report it? What forms do I need? Help! Thank you, —Ian, Boston

The following answer was provided by Mark Misselbeck, CPA, Levine Katz Nannis & Solomon PC, Needham.

A: This is a difficult question to answer without a complete review of the documents. One must review the court filings and judgment. A simple answer but incomplete and perhaps subject to the review of the actual documents: the portion of the settlement associated with wages is income, perhaps subject to SE tax, form SE, and federal and state income taxes; the portion of the settlement associate with personal injuries are not taxable, most other items of the settlement may be taxable reportable as miscellaneous income.