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One important question from my tax professional perspective; is this settlement for damages only or does it include punitive damages of any sort? The latter can be taxed, damages can't generally. Also back wages of any kind are treated as wage income (up to and including getting a W-2 for them). If you aren't sure you can check with your attorney, they should know. I assume they probably are damages only if it's a settlement mind you, I mention this primarily to make sure you don't replace all those debts you pay off with one to the IRS thanks to a surprise tax bill if it's something else.
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Jun 6, 2021 04:32
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Empress Brosephine posted:Yeah I was thinking about that too. I don't think there's any punitives but I'll ask. There is some medical forgiveness so I wasn't sure if that's considered income by the IRS also? Medical forgiveness is probably only a thing if you itemized any out of pocket medical expenses previously, if like most people you didn't that shouldn't cause tax trouble. If you have any taxable amount over $600 they should issue a Form 1099-MISC at the start of next year to report it to you and the IRS anyway. Anyway, this is more in the nature of "paranoia because I've seen this sort of thing bite people before", not any real concern you're actually LIKELY to have any problems, so don't stay up nights panicking about it just because I asked  .
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Jun 7, 2021 01:02
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