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New Member
posted Jun 3, 2019 12:00:51 PM

Is a settlement for wrongful termination taxable?

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4 Replies
Level 7
Jun 3, 2019 12:00:52 PM

Yes, settlement for wrongful termination is taxable income.

See Are legal settlements taxable?

https://ttlc.intuit.com/questions/2899059-are-legal-settlements-taxable

To report a lawsuit settlement in TurboTax:

  • Click My Account (Top right of your screen).

  • Select Tools.

  • In the pop up window, select Topic Search.

  • In the search bar, type in lawsuit settlement.

  • Highlight it and select GO, and follow the prompts.

New Member
May 20, 2022 12:43:39 PM

i received two checks from a wrongful termination-one check was from back wages and taxes were taken out of that-the second one is 16,875 for non-economic damages including emotional distress. i do not work and live on social security earning only. I was told I would be sent  a Form 1099 for the second check. What percentage of the $16,875 will i be taxed?

Level 15
May 20, 2022 1:57:45 PM

It is not taxed in a vacuum ... it is added to your other income so it can be taxed anywhere from zero % to 35%. 

Level 15
May 20, 2022 2:07:01 PM

But only the amount over your Standard Deduction is taxed.  

For 2021 the standard deduction amounts are:

Single 12,550 + 1,700 for 65 and over or blind (14,250)

HOH 18,800 + 1,700 for 65 and over or blind

Joint 25,100 + 1,350 for each 65 and over or blind

Married filing Separate 12,550 + 1,350 for 65 and over or blind