Q: I am currently involved in a lawsuit regarding workers compensation. Will the lump sum be taxable?
A: 99.9% no...IF the text of the settlement document specifies that a certain dollar amount is payment of back wages, THAT could be taxable. But if it is just a lump sum because the parties disagree on the 'facts' and the defense wishes to 'buy their peace', then no, settlement payment is NOT taxable earnings.
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