Wrongfully terminated. wraping up settlement. please help.

[camero]

What is the name of your state (only U.S. law)? Illinois

I was Terminated from a large company aprx 3 years ago. Management went out of there way to make it look like I did something wrong to cover there own butts. they altered/fabricated a few documents to make it look like I was a bad employee and to make it look like I was breaking company rules. They terminated me. Through Human Resources I was able to locate time stamped entries and proof that my documents were altered by a few of the individuals in management. They were Changing the status of "passed" audits to "failed" audits, changing the times and dates of places I was working to make it look like I was abusing company time etc.

I filed a lawsuit shortly after and we are down to brass tax. we came to an agreement of $xx,xxx. my lawyer is receiving 40%. the judge specifically said in our meeting that THIS WILL NOT BE TAXED. (both parties agreed)

on the release agreement the company requests that I release them from all and any past, current and future claims against them and I keep this 100% confidential in return for the settlement money blah blah blah pretty standard stuff. My lawyer and I agreed to this. we added to the agreement that a W2/1099 will not be issued as the Judge requested. The Company said they will not cut the check until that verbiage is removed from the agreement. My question is will this company try to send me a W2/1099 even though the Judge told them not to tax it and we all agreed on it? if they refuse to pay until the no tax verbiage is removed will the Judge hold them accountable to uphold this agreement even though it is not in the official agreement release?

last question: when the company denied to pay until the tax verbiage was withdrawn we remade the agreement and I requested that my lawyer add that the company cannot sue me with any past, current or future claims. ( I pretty much requested that we mirror their demands to protect myself from getting a suit filed against me when this is all over with) the company again denied to cut the check until that verbiage is removed. they wont pay me unless I sign their original document and they wont let me add anything. is this a common practice?? is this something I should worry about? does this seem like they are prepping to come after me when this is all said and done with?

 

[cbg]

Your lawyer is in a much better position to answer your questions than we are. That's what you're paying him for.

 

[justalayman]

the payee does not tax you nor do they determine if it is taxable income. In fact, neither does the judge. If it is considered taxable income per the IRS rules, then it is taxable income.

how do you expect the company to comply with the law regarding a 1099? If they are required by law to issue one, then they must issue one, regardless of what the judge says. The judge cannot compel a person to break the law.

part of the problem you are having is this:

we added to the agreement that a W2/1099 will not be issued as the Judge requested

that is not what the judge "requested" (and if a judge requests something, it doesn't mean a thing. It is only when they issue an order does it matter). The judge "requested" the money not be taxed. If this was addressed to the company, then the only thing it would mean to them is that they do not withhold taxes from the payment. If they issue it with a corresponding 1099, they wouldn't withhold any taxes anyway since it is a generic statement that they made a payment to somebody.

I filed a lawsuit shortly after and we are down to brass tax.

I'm just being picky but it is brass TACKS, like in little nails; not tax.

 

[camero]

Thanks

Always thought it was tax. I'm an idiot. Thanks for the help

 

[camero]

Once my lawyer was guaranteed he was getting 40% of what is a large amount of money he now seems to care less for happens to me during or after this all concludes. Kinda $h1ty . I suggested that we tear up this agreement because they will not allow us to make any of our own implementations and just take this to trial and he exploded he is even referring me to lawyers in case the company does tax me or if they file a lawsuit against me I can tell he wants nothing else to do with this he just wants to get paid that's why I am on the site looking for help

 

[justalayman]

Always thought it was tax. I'm an idiot. Thanks for the help

no, not an idiot. I'm just anal about some odd things and that is one of them. Similar thing with irregardless (not a real word. It's regardless), taking a different tack (many people use tact as a shortened version of tactic) (tack: a sailing reference speaking to one's position in respect to the wind), I could care less when the phrase is actually I couldn't care less. If you could care less, that means you care some amount. If you couldn't care less, that means you do not care at all. Pronouncing ask as axe.

and many many other trivial things the bug me but piss off other people when you attempt to correct them.

so, it really is me.

ns and just take this to trial and he exploded he is even referring me to lawyers in case the company does tax me

again, the company does not tax you. The closest thing to it is they withhold tax on behalf of the IRS, SSA, your state's treasury, or anybody else that typically has money withheld from your paycheck. If you can get them to not withhold any money for taxes, I think that is all you can expect. Again, they do not determine if the money is taxable or not. Whether is is taxable income or not is something your lawyer should be addressing with you. I do not know if it would be taxable income or not. There are a few tax pro's here that would be able to give you a much better answer though.

 

[ecmst12]

My understanding is that if the settlement represents wages, it must be taxed as if it were wages. If it is compensatory damages, it's not taxable. Your lawyer should understand this and know which one applies. Being that it's a wrongful termination suit, I would tend to suspect that the settlement represents wages and so will be taxable.

 

[Shadowbunny]

justalayman, my DH keeps a running list of commonly mis-used or mis-pronounced words. He's been known to annoy a person (or wife) on occasion with his corrections.

 

[LdiJ]

Once my lawyer was guaranteed he was getting 40% of what is a large amount of money he now seems to care less for happens to me during or after this all concludes. Kinda $h1ty . I suggested that we tear up this agreement because they will not allow us to make any of our own implementations and just take this to trial and he exploded he is even referring me to lawyers in case the company does tax me or if they file a lawsuit against me I can tell he wants nothing else to do with this he just wants to get paid that's why I am on the site looking for help

Unfortunately neither the company nor the judge can determine whether or not a lawsuit settlement is taxable. Only the federal tax code can determine that. Also, by law, when I company issues a check to someone, particularly for a large amount, and particularly to a former employee, then with few exceptions, the company is required to either issue a W2 or a 1099 of some sort. There are somewhat rare instances where a settlement from a company to a former employee would not be taxable.

There was a small class action case against an employer in my area where quite a few employees got large payouts. The agreement specifically stated that the payout was non-taxable. Most of the former employees ended up in a world of hurt because they spent the money, and had nothing left to use to pay the IRS when the IRS went after them.

 

[commentator]

Wholeheartedly agree. In the settlements I have seen, if there were no taxes taken out of the "back wages" the employees received, then they owed significant amounts to the IRS, and the IRS found out about it even if they did not report it to them on their taxes.

 

[camero]

What was the amount they were taxed? 40% is going iy my lawyer. Will I be taxed on the entire settlement amount or only on the portion I receive.

 

[LdiJ]

What was the amount they were taxed? 40% is going iy my lawyer. Will I be taxed on the entire settlement amount or only on the portion I receive.

It depends. Sometimes the company will report the entire settlement under your social security number and sometimes just the portion that goes directly to you. However, if the entire amount is reported under your social, then you can deduct the attorney's 40% on Schedule A.

 

[justalayman]

It depends. Sometimes the company will report the entire settlement under your social security number and sometimes just the portion that goes directly to you. However, if the entire amount is reported under your social, then you can deduct the attorney's 40% on Schedule A.

the check will likely be written to the OP and delivered to OP's attorney who will deposit it into the their trust account,. The attorney will then disburse the amount owed to the OP so, what any outsider will see is the entire amount was given to the OP.


but I thought the attorney's costs were not deductible. Under what theory, rule, or whatever are they deductible?

 

[LdiJ]

the check will likely be written to the OP and delivered to OP's attorney who will deposit it into the their trust account,. The attorney will then disburse the amount owed to the OP so, what any outsider will see is the entire amount was given to the OP.


but I thought the attorney's costs were not deductible. Under what theory, rule, or whatever are they deductible?

Attorney fees related to the production of taxable income, are deductible. The attorney fees would not be deductible if the settlement was not taxable.

 

[davew128]

Wholeheartedly agree. In the settlements I have seen, if there were no taxes taken out of the "back wages" the employees received, then they owed significant amounts to the IRS, and the IRS found out about it even if they did not report it to them on their taxes.

If any portion of the settlement is for back wages, a W-2 should be issued and income tax and FICA withheld. Anything other than that goes on a 1099 to the extent its taxable.