The tax reform law passed in December 2017 prohibits tax deductions for hush money settlements in sexual harassment cases. Sometimes called a Weinstein tax, it prevents individuals and companies from writing off the settlements and related legal fees. But the lawcannot deduct their legal fees. If a plaintiff recovers $500,000 but must pay her lawyer 40%, the full $500,000 is income, even though the plaintiff nets only $300,000. The victim is paying tax on money she never receives.
on the IRS website giving notice that it has fixed this problem, even if Congress can't seem to.
The"Repeal the Trump Tax Hike on Victims of Sexual Harassment Act of 2018" was proposed, but seemed to die on the vine. Bravo to the IRS for fixing what Congress didn't. Of course, plaintiffs still have tax problems. After all, just about everything is taxed. Sexual harassment might be verbal, physical or both, and it might impact victims in a variety of ways. The tax treatment of litigation damages is varied and complex. But the rule for compensatory damages for personal physical injuries is supposed to be easy. They are tax free under. Yet exactly what is"physical" isn’t clear.
Wow! The rate of victims will skyrocket!