| Author |
Message |
Larry
Guest
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 Posted:
Wed Oct 19, 2005 8:00 am Post subject:
Payroll tax on lawsuit settlement? |
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I had to sue an old employer for severance pay.
He is now willing to pay me, but considers it a settlement
rather than severance pay. Accordingly he is not paying
his share of the payroll tax. It seems to me that whatever
he calls it, it is pay and requires payroll tax.
Who is right? If I haven't given enough information, what
would it depend on?
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Shyster1040
Guest
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| Posted:
Thu Oct 20, 2005 8:00 am Post subject:
Re: Payroll tax on lawsuit settlement? |
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You're right, provided that you were an employee and not an
independent contractor (a missing fact). Any amount paid,
either as a settlement or pursuant to a final court order,
that represents payment for back pay is considered to be
"wages" for purposes of payroll tax withholding. See, e.g.,
Rev. Rul. 96-65 (which can be viewed at:
http://www.taxlinks.com/rulings/1996/revrul96-65.htm).
The fact that it was paid as a "settlement" rather than in
the ordinary course of your employment is irrelevant - since
it was in settlement of your claims for unpaid wages, it is
"wages." Otherwise we'd all convert our wages into
non-wages by colluding with our employers to be paid "in
settlement" rather than in wages.
He also has to provide you with a Form W-2 showing the
payment.
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
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Seth Breidbart
Guest
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| Posted:
Fri Oct 21, 2005 8:00 am Post subject:
Re: Payroll tax on lawsuit settlement? |
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Shyster1040 <Shyster1040@nospamhotmail.com> wrote:
| Quote: | You're right, provided that you were an employee and not an
independent contractor (a missing fact). Any amount paid,
either as a settlement or pursuant to a final court order,
that represents payment for back pay is considered to be
"wages" for purposes of payroll tax withholding. See, e.g.,
Rev. Rul. 96-65 (which can be viewed at:
http://www.taxlinks.com/rulings/1996/revrul96-65.htm).
|
But it isn't "back pay" (payment for work already performed)
but rather "severance pay" (payment in lieu of future
payment for work that would otherwise have been performed).
I don't know if that makes a difference.
Seth
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >>
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