Lawsuit settlement income for non-resident - Spidell

Lawsuit settlement income for non-resident

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Message Board Lawsuit settlement income for non-resident

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    • #189106
      Andrew McVay

      Taxpayer, who has lived full time in Maryland since 2011, receives tax year 2018 W-2 and 1099-Misc forms reporting taxpayer’s share of proceeds from a multi-employer class action lawsuit settlement. The settlement was for certain U.S. employees of taxpayer’s employer (amongst other employers) who were employed by the company from 2010 through 2012. The 2018 W-2 associated with the lawsuit settlement showed all the income as Maryland source income along with Maryland income tax withholding on same. Taxpayer lived in CA full time prior to 2011.

      My question is whether any portion of the settlement amounts (W-2 and 1099-Misc) is CA source income in 2018 (the year received) if the taxpayer was a non-resident for all of 2018.

      If a portion of the settlement amount is considered 2018 CA source income how should the amount of CA source income be determined.

    • #189179
      Lynn Freer

      The portion of the settlement for the work performed while in CA is taxable to CA. She’ll get a credit on MD for the CA tax paid. If you can’t separate it, you could prorate by months in CA versus total months in the time period.

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