MCLE SELF-STUDY: TAX CONSEQUENCES OF SETTLING EMPLOYMENT LITIGATION

AUTHOR^*

William Hays Weissman

Often parties settle litigation in employment-related cases by coming to a number first, then figuring out what that number represents in terms of the amounts paid on various claims. Often defendants are concerned about the government disagreeing with the tax consequences and imposing additional taxes, penalties, and interest upon them; plaintiffs often seek to minimize their tax obligations on whatever amount they are receiving.

When the parties have such different views, it can create added challenges to settling. But a little added understanding and preparation can help alleviate potential problems.