Received an incorrect 1099.

[kpangelinan]

What is the procedure to dispute a 1099 that was sent to one of our clients? The 1099 was for a sexual harassment settlement and was 1099'd by the attorney's representing this individual. It's reported on a 1099Misc, box 3, other income. The amount is $30,000. The client did call the IRS directly (3 different times to get three answers that were all the same) and gave them the details of the lawsuit. They told her that it was definitely not taxable. The client then received, several months later, the 1099 in the mail.

[spanel]

Let me first say I dont post much on this board..

But according to the info posted and in the Tax Book.. its looks like to me, that it IS taxable. Sec 3-20. "Other Claims"

Damages for nonpysical injuries(deicrimination,defamation,libel,slander,e tc) are all Taxable.

Someone Step in if im wrong.


Chris

[Burke]

You are correct, Spanel. It IS taxable. These laws changed some time back, at least a decade or more. Attorney's fees may be claimed as a deduction, if paid by the taxpayer, as an adjustment on Line 36, Form 1040.

[DaveO]

Unless some of the money is for medical expense such as therapy it's all taxable. Not surprising the IRS employees gave conflicting advice.

[Davc]

You are correct. It is taxable. These laws changed some time back, at least a decade or more. Attorney's fees may be claimed as a deduction, if paid by the taxpayer, as an adjustment on Line 36, Form 1040.

Only for certain types of cases and sexual harassment isn't one of them:

Unlawful discrimination claims legal fees. Attorney fees and
court costs paid after October 22, 2004 for actions involving a claim
of unlawful discrimination, a claim against the U.S. Government,
or a claim made under Section 1862(b)(3)(A) of the Social Security
Act, are deductible as an adjustment to income rather than as
a miscellaneous itemized deduction. The deduction is limited to
the amount included in gross income for that claim.
All other attorney fees and court costs for this type of claim are
deductible as a miscellaneous itemized deduction subject to the
2% AGI limitation.

[erchess]

Sexual Harassment

I would have thought that Sexual Harassment was included under "unlawful discrimination" but I am not a lawyer and I don't have a cite.

[Burke]

That is exactly what I thought. I would include sexual harassment cases as unlawful discrimination, as it involves gender.

[AuditorTurnedGood]

I don't think

I would (of course, I don't have a law degree, but I wanted one once). Discrimination generally results in some sort of treatment that puts the victim at a disadvantage, such as the loss of a promotion. Though there is gender based discrimination, sexual harrasment is behavior that has a devestating effect on the victim's well being and self esteem, but does not deny them some tanigble item or position based on gender. I'd play it safe and say it's not discrimination. Sorry all, this is totally off the tax subject.

[Burke]

Good discussion, though and it does involve a tax situation (deduction of the attorney's fees and where it goes.) Will try to run this by some legal counsel and post what I find.

[Burke]

Just a quick Google search turns up the following:

"Title VII of the Civil Rights Act of 1964 protects individuals against employment discrimination on the basis of sex, as well as race, color .................

Title VII's prohibitions against sex-based discrimination also cover:
Sexual Harassment. This includes practices ranging from direct requests for sexual favors to workplace conditions that create a hostile environment for persons of either gender, including same-sex harassment."

Source: The US Equal Employment Opportunity Commission.

http://www.eeoc.gov/types/sex.html

[kpangelinan]

Thanks everyone. Some great information!

Thanks everyone. Some great information!

Love this site! And the book!!!