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A plaintiff receives an out-of-court settlement to a lawsuit that was a continuation of a charge of discrimination that had been filed with the EEOC - the plaintiff having been issued a right-to-sue by the EEOC. The defendant issued a federal Form 1099 with the transmission of its settlement. Question: is such a settlement a tax event?

Settlement for injury is not taxable. If it is for lost wages or interest, it is taxable. Settlement for emotional or physical distress is taxable. Attorneys fees are deductible if they are an attempt to get you taxable income otherwise they are not deductible. You can usually deduct legal expenses that you pay or incur to produce or collect taxable income or in connection with the determination, collection, or refund of any tax. Settlement taxes Your U.S. Tax Return: The U.S. Income Tax Topics 1