Class Action Lawsuit Compensatory Damages Taxable?

[Sheron]

s About Taxes)/Class Action Lawsuit compensatory damages taxable? Advertisement Expert: John L. Tidwell - 4/8/2009 Hi. Last year I was part of a Gender Class Action Lawsuit in NY. We were awarded back pay with fed taxes withheld on a W2. The second payment we were told was Interest on the amount of back pay and would receive a 1099 INT. However, we rec'd a 1099 MISC and were told by our lawfirm that the 2nd payment was considered "Compensatory Damages" and the 1099 MISC was correctly issued.  My question: Isn't  Compensatory Damages non-taxable?  A speedy reply would be appreciate since next week is April 15th. I still need to file my taxes. thanks.

[Uriel]

Hannie:

Usually damages are not reported as income except when the tort is wage based in nature.  When your lawsuit is based on workplace wages then yes it is reportable.  Interest is always reported as income even if its is on damages recovered in a lawsuit.  Your W-2 was compensatory to correct the error of gender base under pay.  Therefore, it all is reportable.

John