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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 14483
Experience:  15years with H & R Block. Divisional leader, Instructor
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A discharged state employee is entering into a Settlement and

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A discharged state employee is entering into a Settlement and Release Agreement for his claim for severance compensation from the state. No actual court litigation occurred. State is offering a lump sum payment equivalent to one-year's wages - state will be making customary employment withholding, for taxes, so. security, etc.

Employee is inquiring: whether it's an important tax consideration for him if this is considered a "Qualified Settlement Agreement" or a Non-qualified Settlement Agreement?

Robin D :

Hello and thank you for using Just Answer,
A Non qualified settlement is one that is not excluded from taxable income because the settlement does not involve physical injury.
Employee is inquiring: whether it's an important tax consideration Yes it would be as the Qualifying settlement would not be taxable but it would also be paid because of physical injury to the person.

Robin D :

I hope this information is helpful.

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