Should my attorney have filed a 1099 for a physical injury, emotional distress settlement?
Won settlement. $15k was issued to me by employer(defendant). That was taxed and considered back wages. The remaining money was sent to attorney to be distributed. Atty sent me a 1099, line 7! Should my attorney have sent me a 1099 at all? The remaining money was for physical injury / emotional distress.
2 answers | asked Mar 25, 2011 2:15 PM [EST] in Settlements and Releases | applies to PennsylvaniaAnswers (2)
Before I respond to your inquiry, I must state that we have not spoken, I have not reviewed the relevant documents and facts, and I do not represent you. Therefore, my discussion below is not a legal opinion, but is informational only. Finally, my discussion applies only to issues to which Pennsylvania or Federal law apply, unless otherwise specified.
That being said, Mr. Goldner's answer is exactly correct. You should consult a tax attorney or knowledgeable CPA on whether you have to pay FICA/FUTA/Income tax on the 'personal injury' amounts right now, or can wait until next April to do so. If you wait, you may be subject to penalties.
If you would like to discuss this matter further, please feel free to contact me at the below address(es) or number.
/Christopher E. Ezold/
The Ezold Law Firm, P.C.
One Belmont Avenue,
Suite 501
Bala Cynwyd, PA 19004
(610) 660-5585
Cezold@Ezoldlaw.com
www.ezoldlaw.com
posted by Christopher Ezold | Mar 25, 2011 3:00 PM [EST]
That being said, Mr. Goldner's answer is exactly correct. You should consult a tax attorney or knowledgeable CPA on whether you have to pay FICA/FUTA/Income tax on the 'personal injury' amounts right now, or can wait until next April to do so. If you wait, you may be subject to penalties.
If you would like to discuss this matter further, please feel free to contact me at the below address(es) or number.
/Christopher E. Ezold/
The Ezold Law Firm, P.C.
One Belmont Avenue,
Suite 501
Bala Cynwyd, PA 19004
(610) 660-5585
Cezold@Ezoldlaw.com
www.ezoldlaw.com
posted by Christopher Ezold | Mar 25, 2011 3:00 PM [EST]
The ENTIRE AMOUNT you received, including the attorney's fee, is taxable. You have to deduct the legal fees on a Schedule A. Even though the remaining money was for "physical injury/emotional distress," the settlement is considered a wage settlement, not a personal injury settlement.
This is an anomaly in the tax code which employment lawyers have lobbied to fix, but unsuccessfully. It's crazy but both you and your lawyer will be taxed on your lawyer's fee (although you *will*, as I said, be able to deduct the legal fees on your Schedule A.)
posted by Harold Goldner | Mar 25, 2011 2:27 PM [EST]
This is an anomaly in the tax code which employment lawyers have lobbied to fix, but unsuccessfully. It's crazy but both you and your lawyer will be taxed on your lawyer's fee (although you *will*, as I said, be able to deduct the legal fees on your Schedule A.)
posted by Harold Goldner | Mar 25, 2011 2:27 PM [EST]
