If I get a settlement from my pregnancy discrimination case , do I have to pay taxes ? Can I claim that it is all for personal injury or do I have to claim that part of it is back wages ? Should the settlement agreement be written to differentiate ?
Please consult a tax attorney, but the IRS typically considers employment related settlements 100% taxable. There are creative ways in which you may attempt to defer or defray taxes, and most experienced employment attorneys are willing to discuss the various options with opposing counsel. Inclusion of a a tax indemnification provision may smoothe the process.
If you got fired because you were pregnant, there is an argument that it was unlawful discrimination that might be protected from ordinary taxable income. However, this is a very tricky area. So you need to retain counsel to review the complaint that was filed, the answer and the settlement agreement. We have just spent thousands of dollars advising someone on a discrimination action and I can promise you these are not easy cases.