Do I Have To Pay Taxes On A Law Suit Settlement For Sexual Harassment And Wrongful Termination?
In 2004 I finally received a settlement for a wrongful termination in 2001. I was terminated for complaining about a person who was physically hurting me and making lude comments. The company finally paid me, 1/2 went to the lawyer, and then sent a 1099. I didn’t claim it on my income tax, and now the IRS is billing me for almost the entire amount I actually received. My lawyer at the time said it was not taxable because it was for mental anguish. What can I do? A: I’m pretty sure you do. Here’s an article that sums it up: http://www.ssd.com/publications/pub_deta… One quote highlighted there: “Under this rule, damages for pain and suffering, emotional distress, and punitive or exemplary damages are taxable.” However, you may be able to deduct the attorney fees – the cut your lawyer took from your settlement. If that hasn’t already been taken into account you might walk away with a little money.
