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Did the employer withhold FICA and medicare taxes from the payment? or
Is this payment going to be reported on Form 1099 Misc as non employee compensation?
Most of the basis of the settlement you provided are taxable and included as income.
Here is link to the publication that may help-
Legal fees(Attorney fees) that is paid to you as part of settlement will be included in income but you can get a deduction for the Attorney fees paid on Sch A, itemized deduction subject to a 2% floor.
See below link to the IRS guidelines to Legal awards and settlements to get more detailed information and insight.
Let me know if you have any question.
Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.