Gross proceeds paid to attorneys. Under section 6045(f), report in box 14 payments to an attorney made in the course of your trade or business in connection with legal services, for example, as in a settlement agreement, unless the attorneys fees are reportable by you in box 7. Generally, you are not required to report the claimants attorneys fees. For example, an insurance company pays a claimants attorney $100,000 to settle a claim. The insurance company reports the payment as gross proceeds of $100,000 in box 14. The insurance company does not have a reporting requirement for the claimants attorneys fees subsequently paid from these funds.
These rules apply whether or not the legal services are provided to the payer and whether or not the attorney is exclusive payee (for example, the attorneys and claimants names are on one check) or other information returns are required for some or all of a payment under section 6041A(a)(1). For example, a person who, in the course of a trade or business, pays $600 of taxable damages to a claimant by paying that amount to a claimants attorney is required to furnish Form 1099-MISC to the claimant under section 6041 and furnish Form 1099-MISC to the claimants attorney under section 6045(f). For more examples and exceptions relating to payments to attorneys, see Regulations section 1.6045-5.