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Posted by removeps-groups@yahoo.com on December 9, 2007, 10:34 pm
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Are penalties from a lawsuit settlement taxable at federal and state
(California) levels? The lawsuit is about employees being overworked
and not paid overtime. Of the settlement amount, 50% is W2 income,
35% penalty, 15% interest. Want to know because if the penalty is
taxable, then my income would be higher, and to avoid tax penalties
for underpayment of tax I'd either have to make estimated payments or
take advantage of the prior year safe harbor rule (this year's W2 tax
110% of last year's total tax, though 100% for lower incomes).
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