Bankrupt Employer - Priority Wage Claim Tax Liability

[billyjoebob]

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

My previous employer filed for Chapter 7 bankruptcy more than a year ago.
Since that time the estate has been fully liquidated and I was paid $10,000
as settlement for a priority claim for unpaid wages. The claim was paid
in 2008.

All that I have received from the trustee was a check written on the
escrow account in the amount of $10,000. There was no indication that any
taxes have been withheld on this amount nor have I received any additional
statement indicating that this income should be included in my 2008 tax
return....no 1099 or something similar.

My guess is that there is a tax liability but I'm unsure how it gets addressed.

Should I have received additional information from the trustee?
What is the tax liability on this amount?

Thanks in advance.

 

[LdiJ]

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

My previous employer filed for Chapter 7 bankruptcy more than a year ago.
Since that time the estate has been fully liquidated and I was paid $10,000
as settlement for a priority claim for unpaid wages. The claim was paid
in 2008.

All that I have received from the trustee was a check written on the
escrow account in the amount of $10,000. There was no indication that any
taxes have been withheld on this amount nor have I received any additional
statement indicating that this income should be included in my 2008 tax
return....no 1099 or something similar.

My guess is that there is a tax liability but I'm unsure how it gets addressed.

Should I have received additional information from the trustee?
What is the tax liability on this amount?

Thanks in advance.

You should have received the money in a regular paycheck, with proper withholding. I am unsure why you did not.

However, the normal taxes social security, medicare, federal income and state income taxes would be due. You could use form 8919 to report the income so that you would only be subject to your share of the social security and medicare taxes.

 

[billyjoebob]

Thanks

Thanks for your response.