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Tomkelly

March 04, 2008

Posted by Tomkelly

When are settlements taxed?

Last year, when I filed my taxes I included a statement that I received funds from a lawsuit against my former employer.

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  1. Taxman: What was the settlement for?
  2. Tomkelly: sexual discrimination. Thank you for your help

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Taxman

March 04, 2008

Posted by Taxman

5 stars ( 1 rating )

In 1995, the tax law was changed so that settlements from sexual discrimination lawsuits were considered taxable income. Perhaps your accountant just was not keeping current. Prior to this time, settlements were excluded on the basis that they were on account of physical injury.

Reply to the IRS letter indicating the figure that should be excluded from the total award as a result of medical care and attorney's fees, and attach appropriate documentation, such as invoices.

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