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Old 04-17-2015, 01:56 PM
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Do I have to pay Fica/Medicare on Legal Settlement?

I received 2 legal settlements from two companies I went after for not hiring me due to my age.

One company reported this income in the "other income" box of the 1099 sent to me and the other company reported it in the "non employee compensation" box of its 1099 sent to me.

The underlying legal issue was failure to hire in violation of state and federal laws against age discrimination in hiring. Clearly, I never did any work for either of these companies.

Neither company withheld any taxes for income/fica/medicare or for anything else.

I already know this is considered taxable income.

What I do not know is if I am liable to pay fica and medicare taxes on these settlement amounts and if I am liable, do I use the irs form 4137 (for reporting unreported "tip" income for the purpose of paying fica/medicare taxes on it) because that is the only form available for reporting income for the purpose of paying fica/medicare on it.

Please point me to any irs publication, section of federal tax code, or any other legal authority for you answer if that is not too much trouble for you.

Thanks very much for any help you can provide.



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Old 04-17-2015, 08:15 PM
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I already know this is considered taxable income.=========.Correct. Awards received in non-personal injury lawsuits are generally taxable as ordinary income; you may have to payyour state / federal taxes. Whether you have to pay taxes on all or part of your settlement depends on what the money compensates you for, and how you receive the money, you must report all of your income to the IRS unless there is a law that specifically excludes a portion of it from your gross income.

What I do not know is if I am liable to pay fica and medicare taxes on these settlement amounts and if I am liable, do I use the irs form 4137 (for reporting unreported "tip" income for the purpose of paying fica/medicare taxes on it) because that is the only form available for reporting income for the purpose of paying fica/medicare on it.=========>>there is a court case saying settlement payment for age discrimination is wages for sco sec tax purposes and is subject to fica taxes; the settlement payment constitutes “wages.” It is thus subject to FICA tax withholding UNLESS you present any evidence to the contrary.

Please point me to any irs publication, section of federal tax code, or any other legal authority for you answer if that is not too much trouble for you.it is treated taxable wage NOT tip income. You do not need to use IRS Form 4137 to calculate any additional tax you may owe on unreported tip income since you did not receive tip but wage. Only when if you donot report your tip income to your employer , you may need to use IRS Form 4137 to calculate the additional tax you owe on the unreported tip income.



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Old 04-17-2015, 10:51 PM
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Why I used form 4137

Thanks for your help.

Nothing was withheld from the settlements I received including no fica or medicare amounts.

I filed form 4137 as a vehicle to allow me to pay what would have been the "employee" portion of fica had my settlement been actual wages since it was not withheld by the payers of my legal settlements.

About 9 years ago, an employer who misclassified me as a contractor also failed to withhold anything and back then someone advised me to use the 4137 form in order to have a method for me to pay my share of the fica/medicare tax that should have been withheld, but was not.

I called the irs and they confirmed I should use the form 4137 and include a note explaining the circumstances and that I was doing this to pay "my" portion of fica/medicare and the wages on which I was paying them were really not tips. The irs said the 4137 was the only way to do it because they had no forms to cover my situation.

I was just wondering if nothing has changed and now in 2015 I still have to use a form 4137 in order to pay "my" portion of fica/medicare on the legal settlements I received.

If you think I am wrong to use a form 4137, then what other method should I use to pay "my" portion of fica/medicare taxes?

Thanks again.



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Old 04-18-2015, 01:30 AM
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Quote:
Originally Posted by suethebastards View Post
Thanks for your help.

Nothing was withheld from the settlements I received including no fica or medicare amounts.

I filed form 4137 as a vehicle to allow me to pay what would have been the "employee" portion of fica had my settlement been actual wages since it was not withheld by the payers of my legal settlements.

About 9 years ago, an employer who misclassified me as a contractor also failed to withhold anything and back then someone advised me to use the 4137 form in order to have a method for me to pay my share of the fica/medicare tax that should have been withheld, but was not.

I called the irs and they confirmed I should use the form 4137 and include a note explaining the circumstances and that I was doing this to pay "my" portion of fica/medicare and the wages on which I was paying them were really not tips. The irs said the 4137 was the only way to do it because they had no forms to cover my situation.

I was just wondering if nothing has changed and now in 2015 I still have to use a form 4137 in order to pay "my" portion of fica/medicare on the legal settlements I received.

If you think I am wrong to use a form 4137, then what other method should I use to pay "my" portion of fica/medicare taxes?

Thanks again.
.Since 2008, only tipped employees( i guess you are NOT a tipped EE as you do not work ata restaurant, do not you?/) use Form 4137 to report FICA tax amounts on allocated tips and those not reported by their employers.
When an employee is misclassified as a contractor, discrepancies arise with FICA taxes. That's where Form 8919 comes in NOT form 4137 after 2008 as said.i guess before 2008, you had to file f4137. So, you need to use Form 8919 since fica taxes were not withheld from your pay



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Old 04-18-2015, 01:46 AM
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Originally Posted by suethebastards View Post
Please point me to any irs publication, section of federal tax code, or any other legal authority for you answer if that is not too much trouble for you.

Thanks very much for any help you can provide.
i guess you may visit the web site for IRS; http://www.irs.gov/pub/irs-pdf/f8919.pdf



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