EEOC Settlement Payment How
I got an EEOC mediation settlement payment. It was linked to a discrimination during a hiring process. How do I file this in taxes, if my state does not have income tax? I was not an employee. I'm not sure which tax form to file this under.
Answers
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Hi SlipperyOpossum,
Settlements are generally reported on the federal tax return as income, which becomes part of your adjusted gross income and flows appropriately to your state return.
The nature of your settlement may or may not be taxable. If it was for lost wages for example, that would make it taxable. All facts and circumstances matter, including how you were paid, if you were issued a Form 1099-MISC or other statement, etc. Here's some additional examples on this IRS website (emphasis added): https://www.irs.gov/government-entities/tax-implications-of-settlements-and-judgments
"Damages received for non-physical injury such as emotional distress, defamation and humiliation, although generally includable in gross income, are not subject to Federal employment taxes."
"Discrimination suits for age, race, gender, religion, or disability can generate compensatory, contractual and punitive awards, none of which are excludible under IRC Section104(a)(2)."
Here are two IRS guidelines to further help you determine if it's taxable or not. Refer to IRS Publication 4345 here and IRS Publication 525 here on page 33 of 44 in the PDF version.
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Thank you so much for reaching out, and for answering my question to the best of your abilities. I will take your advice to heart, and do more research from this point on. Thanks again!
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