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05-14-2009, 10:14 PM
| | Junior Member | | Join Date: May 2009
Posts: 1
| | | Withholding Taxes for Settlement Exceeding Standard
What is the name of your state (only U.S. law)? DC. I am receiving a settlement check for a discrimination suit.
My 'Former Employer' has issued a W2 $18,000 Gross but withheld $5,200 Federal tax and State $1,500. (Greater than 25% for Federal Settlement). Now they want to reverse the check¬ withhold any taxes ¬ pay medicare; making it all my burden. 1. Should I allow them to NOT withhold FED/STATE taxes? 2. How much should I withhold, if they issue the check for $18,100, pay $1126 Social Security &pay $263 Medicare? 3. Is there a standard or required withholding for a settlement? Again, they are a 'former employer', I am 'unemployed' and I don't want to pay over/under for withholding& wait for IRS reimbursement in 2010. Money's tight &every dollar counts. Is it legal for them to over withhold& then to decide not to withhold at all? Is there some tax law that prevents them from doing this or am I just out of luck? Both parties agreed they withheld as if I was receiving a check for $18,000 gross every 2 weeks.This is a lump sum! |
05-15-2009, 07:23 AM
| | Senior Member | | Join Date: May 2004
Posts: 40,876
| | Quote:
Originally Posted by Cash Rules  What is the name of your state (only U.S. law)? DC. I am receiving a settlement check for a discrimination suit.
My 'Former Employer' has issued a W2 $18,000 Gross but withheld $5,200 Federal tax and State $1,500. (Greater than 25% for Federal Settlement). Now they want to reverse the check¬ withhold any taxes ¬ pay medicare; making it all my burden. 1. Should I allow them to NOT withhold FED/STATE taxes? 2. How much should I withhold, if they issue the check for $18,100, pay $1126 Social Security &pay $263 Medicare? 3. Is there a standard or required withholding for a settlement? Again, they are a 'former employer', I am 'unemployed' and I don't want to pay over/under for withholding& wait for IRS reimbursement in 2010. Money's tight &every dollar counts. Is it legal for them to over withhold& then to decide not to withhold at all? Is there some tax law that prevents them from doing this or am I just out of luck? Both parties agreed they withheld as if I was receiving a check for $18,000 gross every 2 weeks.This is a lump sum! | While I understand that every dollar counts right now, you would be better off if you just accepted the first check they issued, with the withholding they made. Otherwise, it sounds like they are wanting to stick you with the employer's share of social security and medicare taxes. That will come back to haunt you at tax time.
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05-15-2009, 09:52 AM
| | Senior Member | | Join Date: Mar 2006
Posts: 6,673
| | | A discrimination suit will often have two damages involved, lost wages and punitive or other type of damages. The lost wages should be on a W-2 with proper withholding, and the other damages on a 1099. If you were discriminated as a contractor, it will all be on a 1099. What were the damages for?
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