Tax,
Labor/Employment
Nov. 29, 2022
How IRS taxes employment settlements
You must address the Form 1099 on your tax return, but on the right facts, you may be able to explain that the payment should not be taxable.
Robert W. Wood
Managing Partner
Wood LLP
333 Sacramento St
San Francisco , California 94111-3601
Phone: (415) 834-0113
Fax: (415) 789-4540
Email: wood@WoodLLP.com
Univ of Chicago Law School
Wood is a tax lawyer at Wood LLP, and often advises lawyers and litigants about tax issues.
Legal claims about employment are common. Not surprisingly, every employment suit or settlement raises tax issues for employer and employee. Most plaintiffs use contingent fee lawyers, and many assume there are tax issues only for the net money they collect after legal fees. But in Banks v. Commissioner, 543 U.S. 423 (2005), the U.S. Supreme Court ruled that plaintiffs must include contingent legal fees in their gross income, even if they end up with a net che...
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