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Reportability of termination payments to employees
October 16, 2023
Q. We are paying former employees an agreed upon amount after being terminated. Not a true settlement but being paid out of a/p and not payroll. Also, not a legal agreement. We have agreed to pay a "penalty" amount for the employee(s) having to wait for their money. Would the penalty amount be reportable on a 1099? Penalty is an extra amount, not back pay or benefits.
A.
(Answered by IOFM's third-party tax experts)
Counsel should be consulted to provide instructions for the situation you…
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