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are penalties taxed?

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summit5837

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What is the name of your state? MN

The former employer is headquartered in TX but has sales office in MN.

I resigned as a commissioned sales person April 2003. I signed an employment agreement that allowed the employer to set aside $2000 of my EARNED commissions into an escrow account in case of returned sales if/when I left employment. All sales contracts with the customers had 90 money back/return clauses. The company has refused to return all of the commission held in escrow.

In MN the court can award a penalty equall to the amount of money withheld by the employer if not returned within a reasonable period (20 days).

I filed in conciliation court in March for $4055 ($2000 commissions/escrow + $2000 penalty + $55 court fees). Miraculusly, I recieved a check for $635 ($714 - taxes) about a week after I sent the company the certified letter about the court date. A couple of days after that, I recieved a cert letter from them informing me I was suing the wrong company and that I would have to file against Subsidiary company B not parent company A.

I have shown an corporate attorney friend (construction specialist, not employment) the employment agreement I signed to work with the company and we both agree that from the employment contract EARNED commissions are the day of the sale not delivery of the packages and that the money in the escrow account is earned commisions. The company is refusing to pay the rest of the escrow account until all packages are delivered or cancelled. One of the sales happend 20 months ago (all are well past 90 days).

Anyways, I beleive I will be awarded something if not everything from the conciliation court trial. But I still have a couple of questions that my present attorney freind didn't feel comfortable answering:

1) I beleive that I was taxed on the commissions before they went into escrow. The company has not shown me proof (as yet) that this is not the case. When I refile in small claims under the subsidiary company, can I file for the $4055 - the $635 recieved after tax (not the $715 that they pre-taxed)?

2) Also, would the penalty and court cost reimbursment peices be taxable?

Thanks, Joe
 



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