In general, settlement payments obtained through an employment lawsuit are included in your taxable income.
The IRS treats all back pay as wages in the year paid.
This would include the following:
- Back pay
- Front pay
- Emotional distress damages
- Punitive damages
- and any interest awarded
If you had money paid for retirement, it would be reported to you on a Form 1099-R. You should enter the 1099-R into TurboTax. It is taxable in the year your received it, even if it is for prior years.
Click here for additional information on reporting back pay.
Click here for "Are Legal Settlements Taxable?
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