COMPENSATORY SETTLEMENT
ProSeriesTAX ABILITY OF COMPENSATORY AND PUDITIVE SETTLEMENT
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03/20/11 8:11am PDT
Viewed by asker 03/20/11 8:57am PDT
Viewed by asker 03/20/11 8:57am PDT
3 Replies
ArchieLeach
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Questions answered: 9023
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03/20/11 8:12am PDT
Compensatory - probably taxable.
Punitive - definitely taxable.
Puditive - I'm not sure.
Morons. I've got MORONS on my team. Nobody is going to rob us going DOWN the mountain. We have got no MONEY going DOWN the mountain. When we HAVE GOT the money, goin' back UP the mountain, THEN you can sweat.
03/20/11 8:40am PDT
TAXPAYER WS RELEASED FROM EMPLOYER FOR WHAT HE THOUGHT WAS UNJUST CAUSE. FILED SUIT AND WON A SIZEABLE SETTLEMENT. THE ATTORNEY TOLD SAID TAXPAYER THAT THE COMPENSATORY PORTION WOULD BE TAX FREE BECAUSE THE ILLNESS THAT SHE HAD WAS BECAUSE OF THE MENTAL ANGUISH ETC.
TAXPAYER RECEIVED SETTLEMENT IN 2 PARTS. 50% ON A W2 WITH THE WITHHOLDING. 50% ON A 1099 MISC.
I INSTRUCTED HER THAT IT WOULD BE TAXABLE AS RECEIVED FOR FED AND STATE AND PROBABLY SS/MED AND LOCAL TAXES. SHE STATED THAT SHE WOULD CONTACT LEGAL AND REQUEST THAT A CORRECTED 1099MISC BE SENT TO HER WITH -O- INCOME. THAT IS IT IN A NUTSHELL.
03/20/11 8:47am PDT
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Far be it from me to argue with an ATTORNEY, for heaven's sake! But that sounds questionable at best, bogus at worst. She was compensated for wages she missed while she was ill. Those wages would have been taxable had she received them, so I think the compensatory settlement is taxable. Punitive damages are always taxable.
>>>TAXPAYER RECEIVED SETTLEMENT IN 2 PARTS. 50% ON A W2 WITH THE WITHHOLDING. 50% ON A 1099 MISC. <<<
I think this was done exactly right. But then, I'm not an ATTORNEY.
