@whdw41a
If this is not a business lawsuit, then you are in tax trouble. The settlement is taxable, and since the tax reform of 2017, you can’t deduct legal fees from the settlement. So if you are awarded a settlement of let’s say $10,000, and the entire $10,000 is paid to your attorneys, you will still be on the hook for $2200 or more of income taxes because the entire amount is taxable to you. If you have already paid the attorneys, and the entire settlement will come to your pocket, then it will be fully taxable, but you will at least be partly reimbursed for your expenses.
You may want to consult with a professional tax advisor before you make any final decision. You may also want to seek a larger, financial reward, in lieu of the denied fringe benefit.
