Employment Litigation and Claim Settlements: Tax Withholding and Reporting Implications for Employers

Maximizing Tax Benefits and Avoiding Penalties When Allocating Settlement Proceeds, Drafting Settlement Agreements, and Reporting Payments

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


Conducted on Thursday, October 26, 2017

Recorded event now available

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Program Materials

This CLE webinar will provide guidance to employment counsel and tax advisers for navigating and complying with complex tax reporting and withholding requirements when settling employment claims. The panel will discuss best practices for employers to maximize tax benefits and avoid penalties when allocating settlement proceeds, drafting settlement agreements, and reporting payments. The panel will also discuss 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 tax treatment of settlement payments is complex and constantly evolving. Employment counsel and tax advisers negotiating settlement agreements on behalf of employers must understand how the manner in which the agreement is drafted, settlement proceeds are allocated, and payments are made impact an employer’s obligation 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 tax liabilities, employment counsel should carefully consider the language of the settlement agreement with regard to 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 tax 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 drafting strategies

Benefits

The panel will review these and other key issues:

  • 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?

Faculty

Callister, Jared
Jared R. Callister

Shareholder
Fishman Larsen & Callister

Mr. Callister assists businesses and their owners with respect to entity formation, operation, merger and acquisition,...  |  Read More

Wilson, Charles
Charles H. Wilson

Vice Chair, Office Managing Partner
Cozen O’Connor

Mr. Wilson is board certified in Labor and Employment Law by the Texas Board of Legal Specialization. He represents...  |  Read More

Wood, Robert
Robert W. Wood

Managing Partner
Wood

Mr. Wood has broad experience in corporate, partnership and individual tax matters. Concerning the tax treatment of...  |  Read More

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