Sexual Harassment

[Unregistered]

I knew that would get your attention---just kidding.

I have a client that is suing her ex employer for sexual harassment. She is wondering if the settlement will be taxable. I searched high and low, Sec. 104a and 61a, Google, Yahoo and found that in all cases of sexual harassment, the settlement was taxable to the plantiff. Even if the plantiff sues for emotional distress, it doesn't matter because the emotional distress is not treated as a physical injury or physical sickness.

I was thinking that if the original suit called for damages that relate to ruining the chance of future employment in her industry, maybe that could be considered tax free.

I don't know, I'm not a stinkin lawyer and most stinkin lawyers don't know anything about taxes. Of course her lawyer is telling her that the entire settlement is tax free money, naturally.

Anyway, any advice or knowledge on the subject would be appreciated. Bill me if you have to--lol.

[Armando Beaujolais]

I knew that would get your attention---just kidding.

I have a client that is suing her ex employer for sexual harassment. She is wondering if the settlement will be taxable. I searched high and low, Sec. 104a and 61a, Google, Yahoo and found that in all cases of sexual harassment, the settlement was taxable to the plantiff. Even if the plantiff sues for emotional distress, it doesn't matter because the emotional distress is not treated as a physical injury or physical sickness.

I was thinking that if the original suit called for damages that relate to ruining the chance of future employment in her industry, maybe that could be considered tax free.

I don't know, I'm not a stinkin lawyer and most stinkin lawyers don't know anything about taxes. Of course her lawyer is telling her that the entire settlement is tax free money, naturally.

Anyway, any advice or knowledge on the subject would be appreciated. Bill me if you have to--lol.

Even if it could be considered a damage award for future employment, that would be taxable.

The general concept is that an award is taxable/nontaxable based on the nature of what the award is for. If the award is for back wages, or future wages, the amount is fully taxable. If the award is for medical expenses already paid or in anticipation of medical expenses to be paid in the future, the amount is nontaxable.

In TTB, page 3-18, "Damages for emotional distress are taxable if not caused by physical injury or sickness."

Monetary damages for sexual harrassment are likely going to take the form of lost wages or punitive damages. Both are fully taxable.

[BOB W]

Don't forget....

..... the lawyers fee is not offset above the line.

[jainen]

Most likely

Most likely the settlement (assuming she wins) will be taxable, but you know how clients so often get the story wrong. Maybe all the lawyer really said was that his fee would be non-taxable if the case involved discrimination under the civil rights act. Or maybe there is more to the case, such as a rape or assault which caused physical injury. Sometimes settlements are made in non-taxable ways, such as payment to a victim's shelter or investment in staff training.