Hi I have a settlement from a class action lawsuit...
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cassandrabommari
New Member

Hi I have a settlement from a class action lawsuit and half is being taxed with a w2 with payroll and income taxes and the other half is being taxed as 1099 liquidated damages, penalty and interest. W

The suit was with a previous employer
3 Replies
macuser_22
Level 15

Hi I have a settlement from a class action lawsuit and half is being taxed with a w2 with payroll and income taxes and the other half is being taxed as 1099 liquidated damages, penalty and interest. W

Without knowing the details of the settlement that should be available to you, I can only guess that the amount on a W-2 is for wages that were not paid so they are now treated as wages that you should have received and are taxed as such, and the amount on the 1099-MISC is for damages in excess of wages that is taxed as miscellaneous income.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
cassandrabommari
New Member

Hi I have a settlement from a class action lawsuit and half is being taxed with a w2 with payroll and income taxes and the other half is being taxed as 1099 liquidated damages, penalty and interest. W

@macuser_22  How much is the tax rate for the 1099-misc? I’m trying to find out how much I will actually be receiving from the settlement after taxes

macuser_22
Level 15

Hi I have a settlement from a class action lawsuit and half is being taxed with a w2 with payroll and income taxes and the other half is being taxed as 1099 liquidated damages, penalty and interest. W

If miscellaneous income in box 3 then it is simply taxed as ordinary income at whatever your tax rate is based on all of your income.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
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