is this taxable income?

[tranquility]

If the settlement is large, the OP is at risk of a substantial underreporting of income. Willyjo is flat out wrong in declaring the settlement is not taxable. It is not the IRS's job to ferret out the exception, but the OP's to prove it. The IRS will get the 1099. The audit will happen but will probably start with a simple letter for the OP to explain.

By default, all income is taxable per Section 61(a) of the Code unless there is an exception. I assume willyjo is trying to use IRC 104(a)(2) to exempt some of the settlement:

(2) the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal physical injuries or physical sickness;

right?

So, the OP saying the settlement said:

i sued for violation of fmla. in the settlement papers it indicates that they are not admitting to any violations or wrong doing. they also indicated that this release includes, but is not limited to, any claims under the fmla, any claims for any and all damages including damages for emotional distress and physicall illness; and/or any other statutory or common law claims, now existing or hereinafter recognized.

releasee makes no representation or warranties regarding any tax issues relating to the settlement payment provided for herein, and releasor acknowledges that she has not relied upon any advice from releasee concerning the taxability of the amount to be paid under this agreement. releasor agrees that she is responsible for any taxes owed on the payment she receives under this agreement and agrees to idemnify releasee for any tax liability.

and:

i sued for violation of fmla.

Now, it seems to me the person did not get the award for physical injuries, but for violation of fmla making him terminatedone.
Just because some physical injury was alleged does not make it so or that it is the bulk of the settlement.

I'd say the majority is from the violation of the law and the economic damages from that. As well, is the potential for punitive damages in employment law violations. I bet the OP will not be able to support more than a minor portion of the damages with medical bills.

To advise the OP that it is non-taxable is clearly inadvisable and that he can't get in any trouble is flat out wrong. The OP's attorney and tax adviser don't want to make a determination on the matter but Willyjo is going to do so over the internet, with no facts or legal basis for doing so even though he has already been shown to be wrong on matters discussed.

OP this can cost you a lot. Most likely the additional tax will be enough to be considered a substantial understatement which ramps up the penalties. This will be looked at by the IRS and you will have to be right.

Willyjo reminds me of an old Steve ****** skit where he is going to tell the audience how to make a million dollars and never pay taxes. Of course, timing and emphasis is everything but the jist is:

FIRST, make a million dollars.

THEN, when they get you in front of the judge, say "I forgot".

 

[davew128]

Hmmm...what kind of penalties are you talking about? Who is going to be penalized?

The OP for substantial understatement and you as a paid preparer providing material assistance towards a return with an undisclosed position contrary to law.

The OP has a right to not report income if he believes it isn't taxable income.

Only if it is a position based with something tangible in the law and it is disclosed. Simply not reporting anything based on your arguments will get very expensive.

 

[Willlyjo]

If the settlement is large, the OP is at risk of a substantial underreporting of income. Willyjo is flat out wrong in declaring the settlement is not taxable. It is not the IRS's job to ferret out the exception, but the OP's to prove it. The IRS will get the 1099. The audit will happen but will probably start with a simple letter for the OP to explain.

By default, all income is taxable per Section 61(a) of the Code unless there is an exception. I assume willyjo is trying to use IRC 104(a)(2) to exempt some of the settlement:
right?

So, the OP saying the settlement said:
and:
Now, it seems to me the person did not get the award for physical injuries, but for violation of fmla making him terminatedone.
Just because some physical injury was alleged does not make it so or that it is the bulk of the settlement.

I'd say the majority is from the violation of the law and the economic damages from that. As well, is the potential for punitive damages in employment law violations. I bet the OP will not be able to support more than a minor portion of the damages with medical bills.

To advise the OP that it is non-taxable is clearly inadvisable and that he can't get in any trouble is flat out wrong. The OP's attorney and tax adviser don't want to make a determination on the matter but Willyjo is going to do so over the internet, with no facts or legal basis for doing so even though he has already been shown to be wrong on matters discussed.

OP this can cost you a lot. Most likely the additional tax will be enough to be considered a substantial understatement which ramps up the penalties. This will be looked at by the IRS and you will have to be right.

Willyjo reminds me of an old Steve ****** skit where he is going to tell the audience how to make a million dollars and never pay taxes. Of course, timing and emphasis is everything but the jist is:

FIRST, make a million dollars.

THEN, when they get you in front of the judge, say "I forgot".

You can't say I'm "flat out wrong" anymore than you can say you're right!

The language of the settlement agreement does not determine that the employer IS at fault for anything. However, they DID settle the matter in case they WERE at fault for something.

Since there is no proof that the employer discriminated regarding FMLA and the Op/Attorney hasn't pursued Discovery that may or may not turn up such proof, then how can the agreement be framed upon compensation that is taxable income?

On the other hand, the OP is claiming emotional distress/physical injury as a result of the employer's behavior. The employer settled with the OP because obviously the OP DID/CAN document such injuries.

It isn't for the OP to prove that his income is NOT taxable, it is for the IRS to prove that it is! Since no judge, lawyer or Discovery process has turned up proof, do you really believe the IRS can? How frivilous! There might not even be any proof!!

If it was as you "EXPERTS" (sic) *cough* say it is, I would have been in trouble on more than one occassion, long ago.

Using a little bit of common sense here, of course the OP isn't going to ignore the possibility the IRS is going to interprete the agreement to mean a portion of the settlement is taxable income and therefore, he will probably correspond with them. Responses in this thread alone would compel him to do that. But I stick by what I said in my posts in this thread, it would be very hard to prove that any taxable income exists concerning the settlement based on the language of the agreement.

Also, remember...there was no trial so the IRS cannot assume that a portion of the settlement is Punitive Damages (the agreement does not even show any language pertaining to Punitive Damages).

 

[Captian Picard]

The IRS will get the 1099. The audit will happen but will probably start with a simple letter for the OP to explain.

I would agree that accepting a 1099 is not in the best interest of the OP .. the OP can accept or reject the offer on the table.

Seek out a counter offer option that would be best for your tax aspect...w/o a 1099, the IRS usually looks at an agreement sanctioned by a judge & it can be written to avoid taxes, if at all possible .. it depends on why you are getting the money (if its lost wages, then it would be taxed as wages; if its for punitive or suffering then maybe not).

Assume its 100K lost wages ... gov'ts would get about $45K, attny $33K (if contingency) min., leaving the OP with 27K clear of taxes ..... not great but $$ in the pocket.

A Ferengi would take the money and run.