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Phillip B, EA
Phillip B, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 704
Experience:  Practicing since 2004. Expert in 1040, small business, represent vs. IRS, & int'l tax mattters.
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I was recently awarded a settlement from my employer for unpaid

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I was recently awarded a settlement from my employer for unpaid overtime wages.The total settlement is $26000. The actual amount for unpaid overtime wages is $16,000 with the remainder being attorneys fees and 1/2 the penalty which would be awarded by the court.
Do I report that part that is actually for wages on my taxes as income? If so, do I need to pay social security, medicare, federal and state taxes? Do I need to make estimated tax payments?
Thanks for using! I will do my best to provide you with a clear and concise answer to your tax question based on the information that you have provided.

All of the money you receive is taxable. However, only the 16,000 dollars that is designated as unpaid overtime wages is taxable for FICA and Medicare while the remainder of the funds are only taxable to you as other ordinary income. The wage portion should be reported to you on a W-2 with the FICA and Medicare withheld, and the rest should be reported as Other Income on box 3 of a 1099-MISC.

You may want to use a income tax calculator (HR Block, TurboTax Tax Caster) to figure out what you may end up owing this year, then send the IRS some estimated payments to cover the difference.

If there are additional questions or concerns, please reply to this question so that I can assist you further. If this answers your question, please rate my performance between OK and Excellent so that I may receive credit for my work.
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Customer: replied 3 years ago.

My employer did not withhold anything funds from the settlement for any FICA, Medicare or Federal and State taxes. That was the basis for my question. What are the requirements on my part?

Sorry it took so long to reply.

The requirements on your part are to pay the employee share of FICA and Medicare taxes, your former employer is responsible for the employer share.

Since those taxes were not withheld, save (or pay as estimated payments) 7.65% of the overtime portion of the settlement. When you file the form 1040 return, report the income using Form 8919 to report the overtime portion of the settlement as wage income and the portion of Social Security and Medicare taxes that is being taxed with the current 1040 return.

The income will carry line 7 of your form 1040, and the FICA and Medicare taxes will carry to line 57.

Let me know if this helps.

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