Settlement, how much is taken from taxes? | maho

Settlement, how much is taken from taxes?

Sunday, December 6th, 2009 @ 8:46 am

I won a 30,000 dollar settlement against my former employers. 20,000 wages and garnishments 10,000 pain and suffering. How much will be taken out in taxes?

Answer:Consult a tax advisor or the IRS website since your tax bracket can vary. However, 1/3rd is a good rule. You should consider holding your estimated tax payment amount in a CD with a short maturity date so you can earn a few $$ in interest before April 15.

Answer:Unless this was a settlement for physical injury or illness, all of it is taxable. The tax will depend upon your total income for the year so it's not possible to say what the rate might be.

The wage portion will be subject to Federal income tax withholding at 25% (which may or may not be enough to cover the liability) plus FICA taxes (7.65%) and any state income tax as directed by your state. That will be reported on a Form W-2. The remainder may be reported on Form 1099 and may or may not be subject to withholding, however the full amount of the settlement appears to be taxable.

Answer:The W-2 for wages may have withholding of 25%.

If you also get a check, withhold at least 25% for taxes.

$30,000 can easily kick you into that tax bracket.

Answer:Its bad, but I think you should just keep 50% of it for taxes. THere is always some new tax being brought in.

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