A settlement agreement may resolve a legal dispute, but it can also create unexpected tax consequences. In this article, DeWitt attorneys Averi A. Niemuth and Van U. Donkersgoed discuss a recent U.S. Tax Court decision, explain how the origin-of-the-claim doctrine affects the taxation of settlement payments, and outline practical steps employers, employees and their advisors can take to reduce tax risk before signing an agreement.
Read More About Before You Sign the Settlement Agreement: Don't Overlook the Tax Consequences
The IRS has appealed the taxpayer-friendly Kwong decision, which could extend COVID-era tax filing and refund deadlines. Taxpayers who may have missed deadlines should evaluate protective claims now to preserve potential refund rights while the appeal is pending. Read More About The Kwong Appeal: Could You Still Qualify for a Pandemic-Era Tax Refund?