w2 supplemental severance/settlement taxing rate and writing off expenses
I worked on a year-to-year basis at a major cultural institution for 11+ years as a restorer. My first bad performance review came ten years at the job, followed by the loss of job at age 51 nine months later. Ultimately, 2 years after the poor review, I received a $ 33,000 settlement because a smart and kind lawyer friend represented me. Otherwise, I would not receive severence, as I was working year-to-year, similar to an adjunct professor. Just prior to my 1st poor perf review, I co-wrote a Federal grant with my name as a primary author. It was to pay my salary for a project I had already worked on for many years, if successful -- which it was.
The settlement agreement did not mention any allocation - no discrimination, basically letting bygones be bygones), but insisting on nondisclosure.
The lawyer was paid separately by the employer and received a 1099. From the stated settlement amount of $33,000, the check I received was ~ $ 19,500 (under $20,000).
I received a W2 Supplemental, taxed at 25%.
Royer's post in my employment lawyer dot com --
Tax Issues in Settlement C Royer 10-5-2007-1
What are options for allocating severance pay or settlement proceeds? states the following:
'An express allocation will be disregarded only where the facts and circumstances surrounding the payment indicate that the payment was intended to be for a different purpose'.
As to facts -- the successful grant is on record with a federal agency with my name on it.
Now it's tax time, and I wish to 'write off'
costs/expenses directly related to this issue, such as:
preparing info for the lawyer --
scanning the Employee Handbook
reporting specific information requested by the lawyer who was negotiating with the outside lawyer from the 'white shoe' firm hired by the cultural institution
writing my rebuttal
grant-related work such as writing from home, working on weekends, photographing, researching.
computer for emails/scanning/faxing/etc.
cel phone, which was the way I spoke with the lawyer
travel out of town to meet with the lawyer
costs of meeting with professional colleagues and consultants (professors and counselors) to deal with loss of job.
Thank you for your comments.
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