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The breach damages are typically taxable. Can you tell me what contract was breached?
OK. Breach damages like this are taxable, since it relates to income, less any costs you incurred, like legal. You might also have an argument to deduct up front moving, termination costs from a prior employer you left to take the job, travel, housing commitments, etc.
You are likely being offered a settlement as a wage, which will be subject to withholding. You might also ask if you get any pension benefits as a result.
You can negotiate for different tax treatment, since the offer is just that. But most of these settlements end up as wages. The employer pays the payroll taxes, too, but it's taxable to you as a wage.
If you set some of the payment up as reimbursement for costs, that portion will be tax free.
Most of these settlements just take the cash as a wage and pay their taxes. You might also be able to get an unemployment benefit in addition to this settlement if it is a wage.
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