Employment Litigation and Claim Settlements: Maximizing Tax Benefits, Avoiding Penalties When Allocating Proceeds

Tax Withholding Requirements for Employers When Drafting Settlement Agreements and Reporting Payments

Recording of a 90-minute CLE webinar with Q&A


Conducted on Wednesday, May 1, 2019

Recorded event now available

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Program Materials

This CLE webinar will provide employment counsel and tax advisers guidance for structuring complex settlements and navigating and complying with complex tax reporting and withholding requirements applicable to employment claims. The panel will discuss best practices for employers looking to structure settlements, maximize tax benefits, and avoid penalties when allocating settlement proceeds. The panel will provide practical guidance for drafting complex settlement agreements. The panel will also discuss the reporting of payments and the tax implications of plaintiff requests in settlement agreements, including non-wage treatment, personal physical sickness allocations, requests that no IRS Form 1099 be issued, and employer reliance on tax indemnifications.

Description

The law governing the approval of settlement agreements and the tax treatment of settlement payments is complex and continually evolving. Employment counsel and tax advisers negotiating settlement agreements on behalf of employers must understand how structuring a settlement, drafting an agreement, allocating settlement proceeds, and making payments impact an employer's obligations to pay payroll taxes, take proper withholdings or file information returns for 1099 income. Improperly characterizing a settlement payment can result in liability, penalties, interest or other unforeseen consequences.

To minimize potential negative outcomes, employment counsel should carefully consider the structure of the settlement and the language of the settlement agreement about taxable damages. Counsel should clearly state the purpose of all payments such as wages, damages, or attorneys' fees in the agreement, evaluate which payments are taxable and which are nontaxable, and identify the proper reporting forms for each type of claim.

Listen as our authoritative panel of employment and tax attorneys discusses the implications that employment counsel should consider and address when negotiating settlement agreements to resolve employment disputes.

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Outline

  1. Settlement payments that must be reported
  2. Settlement payments that do not have to be reported
  3. Settlement agreement structuring options
  4. Settlement agreement drafting strategies

Benefits

The panel will review these and other key issues:

  • What types of options exist for structuring an employment settlement?
  • What types of settlement payments in an employment dispute are considered taxable income?
  • What tax reporting obligations do employers have following a settlement?
  • What are some best practices for anticipating and addressing tax issues when negotiating employment dispute settlement agreements?
  • What are the tax issues in the context of class actions and collective actions?

Faculty

Cleland, A. Craig
A. Craig Cleland

Shareholder
Ogletree Deakins Nash Smoak & Stewart

Mr. Cleland defends employers in litigation—including in class actions—and counsels them on compliance and...  |  Read More

Gagnon, Matthew
Matthew Gagnon

Partner
Seyfarth Shaw

Mr. Gagnon is a partner in the Chicago office of Seyfarth Shaw LLP.  A member of the Labor & Employment...  |  Read More

Riley, Jennifer
Jennifer A. Riley

Partner
Seyfarth Shaw

Ms. Riley practices in the employment litigation area, with a particular emphasis on complex collective and class...  |  Read More

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Strafford will process CLE credit for one person on each recording. All formats include program handouts. To find out which recorded format will provide the best CLE option, select your state:

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