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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4357
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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If I received a settlement and two checks were given to me,

Resolved Question:

If I received a settlement and two checks were given to me, one with money deducted from tax and the other was not, how much would I owe to taxes? One check was for $79, 000 and $25, 000 was taken out for taxes and the other was for $39, 000 with no taxes taken out. Do you have an estimate of what I would owe when tax time comes. I was told I may receive something back from the money that was taxed on the first check, but highly doubt that if I still owe on the second check. Both are from different places - the one already taxed is from the company that was sued and the one not taxed if from their insurance company. I just need some assistance, as I have paid off debt and people I owed through this whole ordeal during the lawsuit and now left with only 22, 000, which if taxes are owed I'm sure will be more than half that.
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

Lane :

Hi,

Lane :

The amount you'll owe will actually depend on your total income for the year (including those dollars)

Lane :

What they've withheld is about 21%

Customer:

I've been unemployed so this is the only income I've received

Lane :

Can you tell me what the two different check represented? (It COULD be that the 39000 was to indemnify you (make you whole) so that that portion (the other possiobly being punitive?) would not be taxable

Lane :

OK

Lane :

Do you file as single or jointly?

Customer:

Single

Lane :

I can do a quick projection and see where that puts you

Lane :

ok ... give me just a second

Customer:

This was a wrongful termination case and I did not receive anything for punitive damages

Customer:

Thank you!

Lane :

OK what they've done is assume that it's all taxable ... but look at this

Lane :













































Gross income$118,000
Qualified plan contributions-$0
Adjusted gross income=$118,000
Standard/Itemized deductions-$6,100
Personal exemptions-$3,900
Taxable income=$108,000
Tax liability before credits$23,533
Child tax credits-$0
Estimated tax liability=$23,533
Lane :

so with all other things being equal, you're looking at a small refund IF it is all taxable

Lane :

Your standard deduction and personal exemption is















Standard/Itemized deductions-$6,100
Personal exemptions-$3,900
Lane :

so that means that the actual taxable income is 108500, and the tax on that is 23533

Lane :

If 25000 is withheld, you're a little overpaid

Customer:

Oh, okay. My lawyer said I may get something back from the money they taxed but to talk to a tax accountant. Wasnt sure though.

Lane :

looks like they estimated it pretty well

Customer:

Great! Thank you so much! Is there a way that I end up owing? Just trying to be sure so I'mnot freaking out come tax season.

Lane :

I really doubt it if you have no other income ...

Lane :

YOu rreally need to have someone that's good prepare your taxes because not only have withheld more than enough?

Customer:

Don't want anything hidden to come up especially since I received two separate check

Lane :

An award for unlawful termination is considered income to the recipient and thus must be included in income, usually on line 21 of Form 1040 where it says, “other income.” The award is not subject to self-employment taxes.

Lane :

Thays the bad news

Lane :

NOW THE GOOD NEWS

Lane :

The good news is that recent legislation now allows an above-the-line deduction for attorney fees and court costs paid in connection with unlawful termination, discrimination and certain other lawsuits.

Lane :

so not only have they withheld enough, you should have even more coming back because you get to deduct the atorney's fees

Customer:

Hteat! You are excellent! Have a little piece of mind before I get a tax accountant.

Lane :

Great

Lane :

Congratulations

Lane :

Do you know about what the attorney's fees were?

Customer:

Meantt "Great"

Lane :

:) I do that too

Customer:

In total I received a settlement of $225, 000 so they received the remainder $105, 000

Customer:

Haha

Lane :

You'll be fine !!!

Lane :

Nice refund

Lane :

SO many time, I have to give bad news here ... that's great

Customer:

Yay!!! Thank you so much!!!

Lane :

YW:)

Lane :

If this HAS helped, I would appreciate a feedback rating of 3 (OK) or better (excellent, is ideal)… That's the only way they will pay us here.


HOWEVER, if you need more on this, PLEASE COME BACK here, so you won't be charged for another question.

Customer:

Boy, and am I happy to be that one! :)

Lane :

Lane <- smiling

Customer:

You will get a great score! Thank you! Best $30 I've spent lol

Lane :

fantastic

Lane :

Glad to help

Customer:

Thanks Lane!

Lane :

Thanks again,

Lane :

You're very welcome

Lane :

Lane

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4357
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 2 other Tax Specialists are ready to help you
Expert:  Lane replied 1 year ago.
Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

What happens now?

If you haven’t already done so, please rate your answer above. Or, you can reply to me using the box below.
Expert:  Lane replied 1 year ago.


Thanks again Christina,

Always good to hear when the employEE wins one

... finishing up law school myself to add to my CFP practice.

Thanks for the rating!

If you'd like to work with ME again, you can either add me as a preferred expert on your home page, say “For Lane only,” at the beginning of another question OR simply come back to this thread to ask an additional question.

Either way, I enjoyed working with you.

Thanks again,

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4357
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 2 other Tax Specialists are ready to help you
Expert:  Lane replied 1 year ago.

Hey Christina,

Thanks for the bonus too!..

By the way CA will also want a little piece of that ... wouldn't hurt not to spend ALL of it!

Thanks again
Lane
Customer: replied 1 year ago.

Yeah, I did think about that earlier. How much do you think I would have to pay, if you would know? I'm definitely saving a lot of this money and doing some job searching so I don't have to dip into anymore, but it's great if I can get money back when I do taxes.


 


You are very welcome!

Expert:  Lane replied 1 year ago.
Tax Bracket (Single)Marginal Tax Rate
$0+1.00%
$7,124+2.00%
$16,890+4.00%
$26,657+6.00%
$37,005+8.00%
$46,766+9.30%
$1,000,000+10.30%

Customer: replied 1 year ago.

Thank you!


 


Oh yeah, I forgot to ask this yesterday. Do you think it's a good idea to find a tax accountant now, or when tax season comes along? Does it matter at this point? You helped a lot with my general questions so that is nice to know.

Expert:  Lane replied 1 year ago.

Sure!

I think I'd do a little shopping now. Nothing is really going to change between now and then, but it might make sense just to get things put to bed so to speak so that you can be certain of things.

And there is a lot of disparity in pricing for the level of expertise.

You might want to do an google search for someone in the area, and then take the time to do a few phone interviews and keep some notes.

Lane
Customer: replied 1 year ago.

Awesome, thanks again!

Expert:  Lane replied 1 year ago.
You're very welcome!

Lane

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Lane
Lane
Tax Professional
4357 Satisfied Customers
Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986