How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Robin D. Your Own Question
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 14829
Experience:  15years with H & R Block. Divisional leader, Instructor
14155347
Type Your Tax Question Here...
Robin D. is online now
A new question is answered every 9 seconds

COMPENSATION PAID TO A SEAMAN UNDER THE JONES ACT IS IT SUBJECT

Resolved Question:

COMPENSATION PAID TO A SEAMAN UNDER THE JONES ACT IS IT SUBJECT TO INCOME TAX FICA AND IS IT REPORTED ON W2
Submitted: 7 years ago.
Category: Tax
Expert:  Robin D. replied 7 years ago.

HelloCustomer

Thank you for using Just Answer.

I was not certain when I first read your question whether you were looking to report the amount as the payer or the payee.

  • A plaintiff with an employment-related claim will usually have to include the full amount of any settlement or damage award as taxable income, irrespective of whether any portion is paid directly to the plaintiff's attorney.
  • The plaintiff may then claim a federal income tax deduction for the amount of his or her attorney fees.
  • The full amount of a settlement or damage award will probably have to be treated as employee "wages." This will require the employer to withhold income tax, to withhold and pay federal social security taxes (FICA taxes), to pay federal unemployment taxes (FUTA taxes) and to report the payments on IRS Form W-2.

If you received a W2 in relation to the amount you received based on wages that you missed due to your injury then it is due to the above which came about based on a Supreme Court case, a new federal statute, and two IRS Revenue Rulings that affected the law governing the taxation of settlements and damage awards for employment-related claims.

 

Basic Rules on Taxation of Settlements and Damage Awards

Under current law, the general rule is that the plaintiff in an employment-related case is subject to income tax on the entire amount of any settlement or damage award, except for any portion that is essentially reimbursement for medical costs associated with personal physical injury or sickness.Under this rule, damages for pain and suffering, emotional distress, and punitive or exemplary damages are taxable.

 

I sincerely XXXXX XXXXX this information is helpful to you but suggest if you have further concerns about this subject that you speak with your attorney for clarification on the exact nature of your case,



Edited by Robin D on 1/28/2010 at 3:42 PM EST
Robin D. and 3 other Tax Specialists are ready to help you

Related Tax Questions