[yinman1977]

My daughter will get 250,00 in a lawsuit against an employer for unlawful dismissal. Will she have to pay a lot of money in taxes? How is this money taxed? Will she be in the 50% range?

[K_2]

Market Segment Specialization Program (MSSP)


It is hard to say how much of it she will have to pay in taxes without knowing much more information. I'd suggest she go have a consult with a CPA. Sometimes they are free, sometimes around $50. Or in this area anyhow. Remember, they will be state and federal taxes most likely. But above is a link concerning "Lawsuit Awards and Settlements" from the IRS.

[JudyKayTee]

My daughter will get 250,00 in a lawsuit against an employer for unlawful dismissal. Will she have to pay a lot of money in taxes? How is this money taxed? Will she be in the 50% range?

It's a complicated formula based on what is compensatory, what is punitive. I think you need to consult with either a tax Attorney or CPA.

[s_cianci]

Generally, damages awarded in a lawsuit are not taxable.

[excon]

Hello yin:

I saw your question the other day... It perplexed me then, and K 2's answer has sparked a re-perplexing.

I'd be very interested in the details of your daughter's suit. I say that, because an award of $250K, for an UNLAWFUL dismissal, isn't something that I've heard of before.

Unless she's a member of a protected class of workers, or has an employment contract, she can legally be dismissed for any reason whatsoever. Even if she IS a member of a protected class, $250K still seems exorbitant.

I notice that you said "will get" and not "hope she gets", but I'll bet it's the latter.

excon

[JudyKayTee]

Generally, damages awarded in a lawsuit are not taxable.

The question of “what are personal injuries” has been central to much litigation over section 104(a)(2). The issues have encompassed physical versus non-physical (mental anguish) injuries and sickness, and whether punitive damages are received on account of personal injuries. In 1989, Congress amended section 104(a)(2) referencing punitive damages and non-physical injuries. The wording of this amendment created more controversy than before. The IRS took the position that punitive damages are not received on account of personal injuries under section 104(a)(2), and therefore are not excludable from gross income.
In 1996, on the heels of several court decisions that had upheld the position of the IRS, Congress resolved the controversy by amending section 104(a)(2) again. Not only are punitive damages not excludable, regardless of whether received in connection with a physical or non-physical injury or sickness, Congress now restricted the tax exclusion to just physical injuries or physical sickness. Since the August 21, 1996, effective date of that amendment the IRS has a more definite guideline to work with than it had previously.

[yinman1977]

My daughter will get 250,00 in a lawsuit against an employer for unlawful dismissal. Will she have to pay a lot of money in taxes? How is this money taxed? Will she be in the 50% range?

Someone wanted to know why her dismissal was unlawful. Well. First of all she was hit in the back by a supervisor over and over and told to work faster on a production line making boxes. She told the man to stop because he was hitting her too hard. THen, she reported this to his supervisor who laughed and told the man to come over and proceeded to laugh and say I guess she don't want to work here so go home you are fired. YOu can not abuse your employees it was considered sexual haressment and when you report an abusive person on the job it is supposed to be addressed. Ans yes I said she will get this not hope because the employer settled with her. Actually, this will be the first of four payments. I am not sure what the other three payments will be. THe compamy had a past history of treating employees badly. Yes, they can dismiss you from a job but, they do not have the right to physically abuse you. THAT"S ASSULT! And that's illegal

[K_2]

Generally, damages awarded in a lawsuit are not taxable.

Depends on the type of damages awarded.