Generally, report all punitive damages, any damages for nonphysical injuries or sickness, and any other taxable damages in Box 3. Report punitive damages even if they relate to physical injury or physical sickness. Generally, report all compensatory damages for nonphysical injuries or sickness, such as employment discrimination or defamation. However, do not report damages (other than punitive damages):
- Received on account of personal physical injuries or physical sickness;
- That do not exceed the amount paid for medical care for emotional distress;
- Received on account of nonphysical injuries (for example, emotional distress) under a written binding agreement, court decree, or mediation award in effect on or issued by September 13, 1995; or
- That are for a replacement of capital, such as damages paid to a buyer by a contractor who failed to complete construction of a building.
Damages received on account of emotional distress, including physical symptoms such as insomnia, headaches, and stomach disorders, are not considered received for a physical injury or physical sickness and are reportable unless described in (b) or (c) above. However, damages received on account of emotional distress due to physical injuries or physical sickness are not reportable.
Also report liquidated damages received under the Age Discrimination in Employment Act of 1967.
Taxable back pay damages may be wages and reportable on Form W-2. See Pub. 957.
For additional information see the 2019 Instructions for Form 1099-MISC