Labor/Employment
Jul. 21, 2015
Do defendant employers withhold taxes on settlements?
Most employment cases - whether wage and hour, discrimination, wrongful termination, etc. - produce taxable damages. But are they wages subject to withholding?
Robert W. Wood
Managing Partner
Wood LLP
333 Sacramento St
San Francisco , California 94111-3601
Phone: (415) 834-0113
Fax: (415) 789-4540
Email: wood@WoodLLP.com
Univ of Chicago Law School
Wood is a tax lawyer at Wood LLP, and often advises lawyers and litigants about tax issues.
The majority of employment cases settle, and in many - in most, I hope - employer
and employee actually agree on the tax treatment of the payments. Typically, a portion
is wages subject to withholding, and a portion is taxable on a Form 1099. Sometimes,
there is a tax-free element too, when the plaintiff claims physical injury or physical
sickness.
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