QUESTION
How do I settle an employment discrimination suit without paying a lot of taxes?
Asked on Nov 09th, 2011 on Taxation - Illinois
More details to this question:
I am thinking of settling an employment discrimination suit but I want to avoid paying as much tax as possible. Otherwise I could end up owing more than I was awarded after attorney fees, taxes and other expenses. Plus, I'm losing my EIC this year if I do settle because income will be too high to qualify. I'd like to pay my mortgage company directly from winnings if it's possible to avoid taxes that way as well. Is that possible?
2 ANSWERS
Donald B. Lawrence
Essentially, your damages from an employment discrimination claim are in compensation for lost wages unless you are able to characterize them as compensation for personal injury of some sort. As wages, your earnings are subject to income tax. This question should be directed to your attorney who will know more about the nature of your claim and the characterization of the damages you are seeking.
Answered on Nov 28th, 2011 at 12:59 PM
Chapter 7 Bankruptcy Attorney serving Lisle, IL
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Award or settlement from an employment discrimination claim is taxable as income.
Answered on Nov 21st, 2011 at 1:42 PM