I have a legal question that involves a lawsuit settlement I received from a private disability
firm. I need a California tax
attorney familiar with disability settlements to figure out what my tax liability
is. I don’t want to get into tax trouble, but want to make sure I’m paying the right amount. My CPA doesn’t know much about my particular situation.
-The lawsuit was to recover benefits
from a period of time where the disability company denied my benefits. They owed me about $115K--we settled out of court on $82K. It took a couple years, but I received the money at the end of 2015.
-My employer paid for 100% of the disability premiums--I paid nothing.
-The disability company sent me a W-2
that lists the settlement as wages, tips and other compensation
. Shouldn't this have been a 1099 since it was a settlement and not payroll? How have you seen this typically handled?
-The disability company W-2’d me for the full $82K, even though I only got $50K (lawyer took $32K as the