My fiance got a settlement from his previous employer that included some compensatory damages. He also drew unemployment for a while. How is this going to affect him on the upcoming tax year??? Should he try and pay some estimated tax on this money so he doesn't get penalized?? They said that they would send him a 1099 form but he is afraid that he willhave to pay his unemployment back if he has to report it on this form. Does anyone know?? Your answers will be a great help to us as we try to plan for our wedding and the purchase of a home with some of this money. Thanks!!
2007-05-07 11:36:26 · 2 answers · asked by deeregurl20 2 in Business & Finance ➔ Taxes ➔ United States
$10,000 backpay with taxes already taken out so he got a check for $7,800.
$30,000 comp. damages b/c he had to move, drive furthur to work etc...
Does this help??
2007-05-07 14:50:26 · update #1
It depends on what he is being compensated for. Compensation for injuries would not be taxable. Compensation for wages due would be taxable just as the wages would be. As a rule, if you would have been taxed on whatever you are being compensated for, you are taxed on the compensation. You can generally avoid penalties by having extra withheld from your current paycheck to cover what you would have sent as a quarterly estimated payment. Without some details, it is difficult to give a precise answer.
2007-05-07 11:47:18 · answer #1 · answered by STEVEN F 7 · 0⤊ 2⤋
He should pay in some estimated tax on the settlement so he doesn't have a big tax bill in the spring, and doesn't owe penalties for under-withholding. If he wasn't supposed to get the unemployment comp if he also got the settlement, then yes, he'll have to pay it back.
Good luck.
2007-05-07 21:42:22 · answer #2 · answered by Judy 7 · 0⤊ 0⤋