Settlement Agreements Taxes

Posted by on Oct 7, 2021 in Uncategorized | 0 comments

In April 2011, the taxpayers and their former employer entered into a settlement agreement. She agreed to withdraw her complaint and the federal agency agreed to pay her a lump sum of $40,000. No tax is due during employment or on the payment of a dismissal (or part of a dismissal wage) if the payment is exclusively related to the assault of a worker. The definition of “injury” specifically includes psychiatric injuries, but specifically excludes emotional injury. This means that payments for bodily injury (including psychiatric injuries) that are part of a transaction are not taxable. A restrictive alliance is an agreement that you will not do certain things within a set period of time after you leave or at a certain distance from your old workstation.