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Settlement Release?

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BillyBobJoe

Guest
My wife settled her wrongful termination/sexual harrassment lawsuit 2 years ago. She represented herself pro se (probably not the best idea). The company attorney sent a fairly complicated release we both signed. It appears the company reported the settlement to the IRS as additional income. We are now being hit with taxes on the settlement. I thought proceeds from a lawsuit settlement was not income? Also, what are the chances she could prevail on breaking the release. We were never told about tax consequences. Thanks for your help.
 


I AM ALWAYS LIABLE

Senior Member
<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:</font><HR>Originally posted by BillyBobJoe:
My wife settled her wrongful termination/sexual harrassment lawsuit 2 years ago. She represented herself pro se (probably not the best idea). The company attorney sent a fairly complicated release we both signed. It appears the company reported the settlement to the IRS as additional income. We are now being hit with taxes on the settlement. I thought proceeds from a lawsuit settlement was not income? Also, what are the chances she could prevail on breaking the release. We were never told about tax consequences. Thanks for your help.<HR></BLOCKQUOTE>


My response:

Say, BillyBobJoeBobFrankBillyBobThorton. How ya doing?

Anyway, the only settlements that are not taxable are damages from "personal injury" i.e., pain and suffering. Your wife's settlement had to do with "loss of income," and when paid to her, is now being dealt with as income as far as the IRS is concerned. It must have been somewhere in your wife's settlement agreement; but, even if it wasn't, it's still categorized as income.

IAAL


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