• Allocation Considerations in Employment Discrimination Settlements: The Taxing Details
  • August 8, 2017 | Author: Debra L. Weiss
  • Law Firm: Meagher & Geer, P.L.L.P. - Minneapolis Office
  • When negotiating the settlement of an employment discrimination or harassment action, there are many aspects to consider. One issue that is often given little consideration, if any, until the very end of the negotiation is how the settlement proceeds will be allocated and how they will be reported to the federal and state taxing authorities. Overlooking this critical determination, however, could be costly to your clients, whether you represent employees or employers, plaintiffs or defendants. This article provides a broad overview of how taxing authorities treat various types of employment damages for purposes of taxation, outlines some of the issues that employment practitioners face when settling an employment matter, and offers some practical guidance on how to approach these issues.