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RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8784
Experience:  CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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I may be receiving a legal settlement of 16,000 to 25,000 from

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I may be receiving a legal settlement of 16,000 to 25,000 from a legal settlement from my former employer and their disability insurance company.   They never payed me disability when I was off work due to mental health conditions caused by workplace stress and a hostile work environment.   After my attorney receives her 33%, I will receive approximately 16,000. the settlement is worded "payment of disability benefits, as well as compensatory and punitive damages for infliction of mental anguish, injunctive relief due retaliatory discharge, attorney's feels and costs.   What should I expect to pay in taxes if I receive this settlement?
Submitted: 8 years ago.
Category: Tax
Expert:  RD replied 8 years ago.

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?

Customer: replied 8 years ago.
At this point I don't know because I haven't received the payment or an answer to any of those questions. Any advice on how I should have the settlement worded?
Expert:  RD replied 8 years ago.

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.,,id%3D7051,00.html



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.

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