is this taxable income?

[davew128]

Seriously, spend some of that settlement money on a tax accountant who can research the matter and give you the CORRECT treatment. What the settlement says means squat. You've been told that by three separate people now.

 

[terminatedone]

so you understand that i am confused. claim it and i owe the irs. dont claim it and i dont owe anything**************i break even

 

[pattytx]

so you understand that i am confused. claim it and i owe the irs. dont claim it and i dont owe anything**************i break even

And get caught, and you'll owe a lot more.

 

[davew128]

so you understand that i am confused. claim it and i owe the irs. dont claim it and i dont owe anything**************i break even

Hire a professional and get it right. Rely on unpaid volunteers who aren't going to read your lawsuit claim and research applicable case law, and effectively throw darts at a correct result.

 

[Willlyjo]

so you understand that i am confused. claim it and i owe the irs. dont claim it and i dont owe anything**************i break even

A good attorney would have made sure the language in the settlement agreement reflected that compensation was a result of Psyche injuries and therefore not taxable!

It doesn't matter if the former employer does not admit to fault. They are paying the claim to avoid costly litigation. The language of the settlement agreement can easily be composed to warrant no tax liability and should have been done. As it is, the IRS can take advantage of a sloppy ambiguous settlement agreement and tax you for the compensation you've received since I don't think you can go back and re-do the agreement.

Good luck--you need it.

 

[Willlyjo]

A 1099 is indicative of income. I would treat the amount as wage reimbursement.

Wrong...it is NOT a wage reimbursement! Unless the language of the settlement agreement says it is, it is not.

I was given a 1099 years ago when a former employer gave me a settlement check for a Wrongful Termination. The IRS contacted me concerning the matter and I explained to them that the settlement was to end litigation concerning my claim to be compensated for psyche and physical manifestations of stress as a result of the Wrongful Termination.

The IRS dropped their claim and any further action to tax my settlement. I think my former employer 1099'd me just to be jerks about it.

 

[musicman654321]

Willyjo may be correct .... you may be able to get a settlement that is not taxable ... if the other party is willing to agree to it ... bring your current one to a tax attny/accountant for review. Normal attnys know jack squat about it & will tell you to take it just to get their $$$

 

[ecmst12]

The wording of the settlement agreement is NOT determinative. Have you not read what the PROFESSIONALS here have said?

 

[musicman654321]

The wording of the settlement agreement is NOT determinative. Have you not read what the PROFESSIONALS here have said?

"Professionals"??? I would question their expertise on this one... I have been through this in THE REAL WORLD ... and have avoided employment & other taxes via the wording of the settlement agreement....

Its just been my experience ... I a professional tax payer lol see my tears on the 18th when I have to write that $40,000 chk to the IRS...

 

[tranquility]

The IRS contacted me concerning the matter and I explained to them that the settlement was to end litigation concerning my claim to be compensated for psyche and physical manifestations of stress as a result of the Wrongful Termination.

Must have been before the law changes in 1996.

From the audit guidelines (Market Segment Specialization Paper) on settlements (at http://www.irs.gov/pub/irs-mssp/a9lawsut.pdf):

The 1996 changes further provide that amounts excludable for emotional distress are limited to
actual "out of pocket" medical costs in cases of non-physical injuries, such as discrimination,
fraud, etc. However, all amounts received on account of a physical injury, with the exception of
punitive damages, are excludable under IRC section 104(a)(2), including amounts for emotional
distress. These clarifying and limiting changes to the statute are effective for amounts received
after August 20, 1996, unless received under a binding written agreement, court decree, or
mediation award in effect on (or issued on or before) September 13, 1995.

"Professionals"??? I would question their expertise on this one... I have been through this in THE REAL WORLD ... and have avoided employment & other taxes via the wording of the settlement agreement....

The professionals know the IRS is getting a reporting of the settlement and if the return reports less, there will be a letter audit. The response will be checked against the theory (from the same audit guidelines):

For taxable years beginning after August 20, 1996, there will still be issues relating to allocations
in out-of-court settlements. The allocation issues will be particularly important in out-of-court
settlements for physical injury cases. Because many cases are settled to avoid the imposition of
punitive damages, it is anticipated that the some taxpayers may erroneously allocate amounts
between excludable and punitive damages in these cases. The allocation issue will not be as
important in the non-physical cases because only out-of-pocket expenses for emotional distress
are excludable under IRC section 104(a)(2) after August 20, 1996.

But, thanks for playing those who have opinions.

OP, read the MSSP as many of your issues are addressed there. I'd get a tax professional who will look at the facts as this is an area where the reporting will be checked and penalties will apply if the reporting is wrong.

 

[davew128]

A good attorney would have made sure the language in the settlement agreement reflected that compensation was a result of Psyche injuries and therefore not taxable!

Somewhere, a village is missing its idiot.

 

[davew128]

Willyjo may be correct .... you may be able to get a settlement that is not taxable ... if the other party is willing to agree to it ... bring your current one to a tax attny/accountant for review. Normal attnys know jack squat about it & will tell you to take it just to get their $$$

Make that two villages.

 

[musicman654321]

Make that two villages.

Your definition for idiot = someone smarter than me


lol

Everyone can post their advice .. mine was to seek a true professional ... yours is nothing really.

 

[Willlyjo]

Somewhere, a village is missing its idiot.

You are so right! So go back to your village!

 

[davew128]

Your definition for idiot = someone smarter than me


lol

Everyone can post their advice .. mine was to seek a true professional ... yours is nothing really.

You're right about one thing. I posted nothing really except pointing out the obvious: You're an idiot who doesn't know what he's talking about. Google "origin of claim" and post back with results.