Happened to come across an IRS audit guide as it pertains to class action settlements.
According to the language in the guide when there is an out of court class action settlement and statements from both the plaintiff and the defendant that states
they are settling simply for the sake of settling, the question of whether or not the award is subject to FICA and FUTA is still an open one.
The guide states that the FICA and FUTA question can be answered by the claims made by the plaintiff regarding matters such as lost wages, overtime etc. Therefore if suits did make such claims and the IRS were to look at the claims made in the suits and says " yep, we say they are subject to FICA and FUTA" , then it's a whole new ball game .
Such a ruling by the IRS would in all likelihood make the settlement payment "earned income" allowing the recipient to open a solo 401k and contribute as much as $18.000 of the settlement to that account.
Unlikely that anything will come out of this but I've found nothing that would refute what the guide says and given the size of the combined settlement pay out (approx 600 mil) don't rule out an attempt by the IRS to collect at least FICA.
BTW . Class members (East Coast) who took delivery and cashed initial checks are in line to receive an additional payment some time after 4-30-18. However a court approved investigator has been hired to try to locate any additional class members who did not respond to the previous mailings . The settlement if any will be reduced by the inclusion of any additional members contacted by the investigator and the fees he will receive for his work. So don't expect more than a few dollars and you'll be lucky if you get that.
According to the language in the guide when there is an out of court class action settlement and statements from both the plaintiff and the defendant that states
they are settling simply for the sake of settling, the question of whether or not the award is subject to FICA and FUTA is still an open one.
The guide states that the FICA and FUTA question can be answered by the claims made by the plaintiff regarding matters such as lost wages, overtime etc. Therefore if suits did make such claims and the IRS were to look at the claims made in the suits and says " yep, we say they are subject to FICA and FUTA" , then it's a whole new ball game .
Such a ruling by the IRS would in all likelihood make the settlement payment "earned income" allowing the recipient to open a solo 401k and contribute as much as $18.000 of the settlement to that account.
Unlikely that anything will come out of this but I've found nothing that would refute what the guide says and given the size of the combined settlement pay out (approx 600 mil) don't rule out an attempt by the IRS to collect at least FICA.
BTW . Class members (East Coast) who took delivery and cashed initial checks are in line to receive an additional payment some time after 4-30-18. However a court approved investigator has been hired to try to locate any additional class members who did not respond to the previous mailings . The settlement if any will be reduced by the inclusion of any additional members contacted by the investigator and the fees he will receive for his work. So don't expect more than a few dollars and you'll be lucky if you get that.
