Lawsuit settlement for back pay

Forum|Forum|6 years ago
January 3, 2020
7 replies
66 views

My research on this forum makes it clear that we must report a lawsuit settlement in 2019 (for back pay in previous years) as wages this year (2019) and must pay federal taxes on the gross proceeds, not the net amount after lawyer fees. In the settlement, my employer refuses to issue a W2, withhold for taxes, or contribute to my public pension. As a police officer with a public pension, we do not pay social security but do pay medicare. I've created a substitute W2 that shows $20k (settlement amount) for federal income, $20k for Medicare wages, and $0 for Social Security wages. The format of this extra W2 mirrors the W2 that the City will provide for 2019 wages. This seems logical and relatively easy to achieve in TT. However, when I submit this extra W2, the program does not appear to apply any Medicare tax to the $20k settlement amount on the W2. It does generate a Form 4852 which I'm advised to mail to Social Security if I want credit for this income. Since I don't pay Social Security and don't get social security benefits from this job, this seems unnecessary, unless it's the only way to pay the Medicare tax that I owe on the $20k settlement. Any advice on how to resolve this Medicare discrepancy either within or outside of TT? Thank you!

TurboTax Premier Windows

Best answer by

your "employer" has until 1/31/2020 to issue W-2. they are required by law to issue a W-2 for back pay. if they don't your first require to make attempts for them to issue W-2

if they don't by the end of February, you can request that an IRS representative initiate a Form W-2 complaint. Call the IRS toll free at 800-829-1040 or make an appointment to visit an IRS Taxpayer Assistance Center (TAC).

The IRS will send your employer a letter requesting that they furnish you a corrected Form W-2 within ten days.
The IRS will send you a letter with instructions and Form 4852, Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. You can use the Form 4852 in the event that your employer doesn't provide you with the corrected Form W-2 in time to file your tax return.
Depending on the time of year, the IRS may have federal wage information in the form of a wage transcript. See Topic 159 for more information on how to get a transcript of W-2 information.

When you call the IRS or visit a TAC office, please have the following information available:

Your employer's or payer's name and complete address including ZIP code, employer identification number if known (see your prior year's Form W-2 if you worked for the same employer), phone number, and
Your name, address including ZIP code, social security number, phone number, and dates of employment.

do not create your own w-2. this will cause problems because the IRS will not have an employer copy.

proceed as above and if you don't get a w-2 complete the 4852. the form would be filled out as if t were from your employer wages and medicare wages 20K social security wages 0.

as a w-2/employee, the legal fees are not deductible. prior to 2018 they would have been a deducted on schedule A as a 2% itemized deduction. this deduction has been eliminated for 2018-2025

A

Anonymous

Answer