Personal Injury/Emotional Distress Settlement

[shelinohio]

What is the name of your state? What is the name of your state?
OHIO

i am trying to settle a case with a former employer. my attorneys told me that i would not have to pay taxes on the money i receive from this settlement. however, my accountant says that i may be liable to pay the taxes. i sued my former employer for sexual harassment, emotional distress, physical injury and wrongful termination. my attorneys did word the settlement as physical injury and emotional distress. am i going to be responsible for the taxes on this??

thank you

 

[loku]

From what you say, you will have to pay tax on some of the amount, but not all of it. Here are the rules exerpted from IRS Pub 17, Your Federal Income Tax:

To determine if settlement amounts you receive by compromise or judgment must be included in your income, you must consider the item that the settlement replaces. Include the following as ordinary income.
1) Interest on any award.
2) Compensation for lost wages or lost profits in most cases.
3) Punitive damages. It does not matter if they relate to a physical injury or physical sickness.
4) Amounts received in settlement of pension rights (if you did not contribute to the plan).
5) Damages for:
a) Patent or copyright infringement,
b) Breach of contract, or
c) Interference with business operations.
6) Back pay and damages for emotional distress received to satisfy a claim under Title VII of the Civil Rights Act of 1964.

Do not include in your income compensatory damages for personal physical
injury or physical sickness (whether received in a lump sum or installments).
Emotional distress. Damages you receive for emotional distress due to a physical injury or sickness are treated as received for the physical injury or sickness. Do not include them in your income. If the emotional distress is due to a personal injury that is unrelated to a physical injury or sickness (for example, employment discrimination or injury to reputation), you must include the damages in your income, except for any damages you receive for medical care due to that emotional distress. Emotional distress includes physical symptoms that result from emotional distress, such as headaches, insomnia, and stomach disorders.

 

[shelinohio]

in other words......an employer who sexually harasses an employee, fires them because they won't let them have their way, and who ultimately causes much emotional damage to them as well as their family, still wins. if we actually get a settlement from these people, the employer doesn't have to pay the taxes on that money, the victim does and our government profits from the victims pain and loss?? why is that not right and why is that allowed to happen? i feel these laws are still here to protect the employer and not the average working citizen. can you please explain the right in this? and why do i still have to pay for something not warrented or asked for?

a confused former employee

 

[loku]

If you win, the employer is the one who must pay the judgment, so the employer does not benefit from this. I do agree with you about the government profiting from the victim’s pain and loss. It is as Dickens said: “The law is the same for rich and poor: neither can steal a loaf of bread.”

 

[shelinohio]

aw, but with our government the poor stay poor, the rich stay rich and the average middle class worker pays

 

[shelinohio]

the employer should not benefit from wrong doings.......too many times the law protects them from paying at all or nowhere near enough

 

[loku]

AW, BUT WITH OUR GOVERNMENT THE POOR STAY POOR, THE RICH STAY RICH AND THE AVERAGE MIDDLE CLASS WORKER PAYS


I think you got it wrong: the rich get richer and the poor get poorer, while the middle class pays and pays.

 

[shelinohio]

ok, ok......that one i will agree with : )
thank you for making me laugh

 

[loku]

My pleasure--that's what I like doing the most.

 

[ckaten]

Taxes on Emotional Distress Lawsuit

I received a settlement in 2006 based on discrimination, sexual harrassment. All of the settlment was put toward "emotional distress". I have a rare neurological/muscle disorder that normally slowly progresses, but has been shown to worsen with stress/emotional distress. As a result of the suffering I went through in my 10 years of employment with the plantiffs, my condition has worsened dramatically, leaving me severly disabled. I initially paid taxes on the $800,000.00 I received, but recently submitted an amended return to the IRS stating that under code sec 104(a)(2), my situation would actually fall under "physical injury", which is not taxable. Please advice me of your view and opinion on this.

Thank you

 

[Zigner]

I received a settlement in 2006 based on discrimination, sexual harrassment. All of the settlment was put toward "emotional distress". I have a rare neurological/muscle disorder that normally slowly progresses, but has been shown to worsen with stress/emotional distress. As a result of the suffering I went through in my 10 years of employment with the plantiffs, my condition has worsened dramatically, leaving me severly disabled. I initially paid taxes on the $800,000.00 I received, but recently submitted an amended return to the IRS stating that under code sec 104(a)(2), my situation would actually fall under "physical injury", which is not taxable. Please advice me of your view and opinion on this.

Thank you

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