As of today based on discussions I've had with IRS they are not budging with regard to the class action settlement. Because we received settlement in 2017 the entire settlement will have to be filed and taxed at prevailing 2017 rates regardless of the fact that the claim years were 2001 through 2016. My hope was that we could go back and amend our returns for the years 2001-2016 pay the additional tax plus interest and if those years are being used for base years for Social Security it would hopefully uptick the monthly benefit. Probably the only other recourse would be tax court. Are you " West Coast" settlement guys hearing anything different ?
Alexander vs. Fedex Willis vs. Fedex
- Thread starter bacha29
- Start date
IRS directions say that if you had a net negative income after deduction(schedule A if you use or the standard deductions) PLUS exemption amount, and the settlement is for a wage claim, and you owed no INCOME tax, you can subtract that negative income for each year covered by the settlement but only in the years you had losses.
I have 3 years with net losses that will apply. The loss would be on line 43 for example on 2009 form 1040, except that the IRS instructs to enter a zero if the amount would be negative. In my case, I will only owe at most $300 extra on a gross of $23k+. I made sure that I got my checks spread out over two years. Basically take your Adjusted Gross income, subtract deductions and exemptions for each year covered. and if the result is negative, subtract that amount from the amount you report as 'other income' from the settlement.
If there hadn't been a settlement, and it went to a trial, and you actually won the claim that you were an employee, you could go back and refile as an employee. The settlement likely precludes that, because the settlement closed the case without answering the question.
In Oregon, the state supreme court actually ruled that the drivers were employees, and the drivers might be able to go back and refile. In my case, it isn't worth the trouble to save only $300.
Then there's the question of whether the IRS will allow you to refile more than 7 year old returns. You might need to go to court to force the IRS to accept amended returns that old.
If you were able to refile as an employee, you would transfer all your business expenses from Schedule C (if you filed as a sole proprietor) to schedule A as unreimbursed employee business expenses. You wouldn't need to file any form regarding social security taxes, and would likely be required to pay the amount that fedex didn't withhold for FICA(the employee portion) minus what you actually paid. Since as an employee, SS taxes are paid on total income, and if a contractor, SS taxes are paid after deducting expenses, you would owe SS tax, but also be owed some refund because you also paid the employer portion as a contractor. It would be close to a net zero, but a little complicated to file. In that scenario, the IRS could conceivably go after FEDEX for the employer portion of SS/FICA tax on the full amount they paid you in each year.
Last edited:
Fred's Myth
Nonhyphenated American
THE DRAMA! You've left me hanging on the edge of my seat!
that driver's were employees. The settlement didn't cancel that decision, but settled all claims related to that decision. The IRS could go after FEDX if the time covered is still within the statute of limitations. I have a feeling that fedex made sure that they would get off scot free.
Judge Miller ruled and he was pretty adamant about this ruled that according to the laws of my state the guys operating in my state were "independent contractors" not employees. Furthermore at least in my case there were no NOL's during any of the claim years. In addition in the "East Coast" settlement X admitted no liability or any wrong doing including worker misclassification . This in turn is one of the key differences between the "West Coast" and "East Coast" ruling. The WC case went all the way up to the US Circuit Court of Appeals while the EC settlement didn't go up that far.
Judge Miller mentioned the fact that the opportunity to go up to a federal appeals court with the EC case was there but the 6 named plaintiffs wanted to settle. He went on to say that the odds of prevailing in the more conservative 7th US Circuit Court of Appeals combined with state law made the chances of prevailing less likely. Furthermore in the letter he wrote to me personally while he couldn't come right out and say it he still made it clear that Leonard Carter was anxious to settle put this behind them but they still wanted the maximum fee. Perhaps due to the fact that they were not awarded the maximum fee in the WC case had a lot of resources tied up in the WC case along with the fact that LC's lead attorney on the case had left the firm.
While the US Supreme Court has not issued any specific rules definitions or guidelines as to what an independent contractor actually is the US Department of Labor has established a criteria it uses to define what is an independent contractor and specifically names the Fedex contractor practice as it's guidepost and example of what a IC is not and the lower courts are taking notice.
In the meantime what I fear is that now with a settlement in place it will in turn embolden XG to go back to the old way of doing things whereby when it comes to command and control you're an employee but when to comes to the divestiture of risk, liability and variable costs.....you're an employee.
If you had any losses in prior years, you'd be able to deduct even as an IC.
I did find another way to avoid taxes on the settlement- you can deposit into a retirement account, maybe all of it. Maybe even a 529 education account or an HSA. If you find that you are a few dollars(or even a few thousand) into a higher tax bracket including the award, you can deposit enough or all of the award to lower your income this year. If you are over a certain age, you might be able to contribute to a 401k or IRA to 'make up' for years prior. If you don't need the extra cash, this might be a good way to avoid the tax or to keep yourself in a lower bracket. That might have been in pub 525 or 536.
Honestly, I just skimmed over this because it didn't really apply to me. Technically, I could deposit $3000 into an iRA and save $300 in taxes, being in the 10% tax bracket this year. For me, not worth the trouble and inconvenience of tying up my money.
Maybe if you need the cash, it might be better to take out a second mortgage, or home equity loan and pay 5-6% interest, deposit your settlement into a retirement account, and save paying 10% or more in taxes on the settlement. If an emergency arises, you might be able to withdraw from the retirement account without penalty when you are in a lower tax bracket.
I did find another way to avoid taxes on the settlement- you can deposit into a retirement account, maybe all of it. Maybe even a 529 education account or an HSA. If you find that you are a few dollars(or even a few thousand) into a higher tax bracket including the award, you can deposit enough or all of the award to lower your income this year. If you are over a certain age, you might be able to contribute to a 401k or IRA to 'make up' for years prior. If you don't need the extra cash, this might be a good way to avoid the tax or to keep yourself in a lower bracket. That might have been in pub 525 or 536.
Honestly, I just skimmed over this because it didn't really apply to me. Technically, I could deposit $3000 into an iRA and save $300 in taxes, being in the 10% tax bracket this year. For me, not worth the trouble and inconvenience of tying up my money.
Maybe if you need the cash, it might be better to take out a second mortgage, or home equity loan and pay 5-6% interest, deposit your settlement into a retirement account, and save paying 10% or more in taxes on the settlement. If an emergency arises, you might be able to withdraw from the retirement account without penalty when you are in a lower tax bracket.
As far as an IRA is concerned class action settlements are not considered "qualified income" and cannot be applied toward an IRA. As far as an HSA a person on Medicare can no longer contribute. I went on Medicare last November 2017 and likewise you have to have a healthcare plan with a high deductible. My Medicare Advantage Plan has a $700 deductible which isn't high enough to meet the "high deductible" definition. Then again given that my monthly premium for the plan is just $ 22 a month I'm not complaining. No wife, no kids, no debts and no mortgage. With the single family housing market around here severely depressed I will take whatever money is left over and spend it on some purely upkeep and maintenance related home improvements Thank you for your help and together we'll keep looking at all possible options when it comes to minimizing the taxes on the settlement.
I don't know if you could call the business practices XG uses cleverness of sleeze but you can't help but be impressed with the way they do it.
You can contribute to an IRA from your qualified income, and reduce your AGI. The idea is to get this years income lower. If you are collecting disability pay- is that eligible to be deposited to a retirement plan?
Also, most Social Security isn't taxable and won't be if your award isn't too big.. So you have at least the standard deduction and the personal exemption of almost $11000 to deduct from the award, and just owe taxes on the amount over that. I only had three full years plus a little covered under the settlement. I guess if you had 10 years or more, it might make your tax situation a lot worse than mine is. Did you have any income from work in 2017? Taxes will be based on conditions last year when you got the settlement.
Last edited:
Income from self employment income subject to Social Security is" qualified income" but the settlement is not subject to Social Security given that it's reported on Box 3 of the 1099. I was covered under all 7 years set forth in the suit and 15 of the 16 so called "claim" years. In December 2016 I was declared totally disabled by Social Security retroactive to November 2015. So for 20127 there is no " qualified income" for 2017. I do think I can lawfully claim another exemption for 2017 which will help. Should I have gone for SSD? I did so based on the off the record advice from a person well versed on the matter . I guess they were right. Despite the fact that 74% of all first time disability claims are denied you have a 1 in 10 chance of getting a reconsideration and the average wait time for a formal hearing even if granted one is 21 months . Mine went through uncontested in just 3 months. I guess when they saw that I've got enough titanium in me to make yourself a set of golf clubs they simply said "get him out of here". The problem for 2017 is that fact that I was getting a subsidy for health insurance under the ACA. What the settlement does however is that I'll have to pay those subsidies back. BTW I asked Judge Miller to order that the settlement be allocated and identified on a year by year basis in the hope that it would improve our chances of being able to go back and amend each year but he refused..
I was approved for Social security Disability three days after they got x-rays of my neck and back, partly because of my age and education level and 30+ years of physical work history. But I had been in an accident 6 years before I even applied that had me sitting in a recliner for almost a year and then limited me to about 2-3 hours a day of work for the next 5 years. If I had known how severe my injuries were, and how long it would take to recover, I would have applied 5 years earlier. Still can't walk, drive, or sit upright without neck support for more than a couple hours each.
Hopefully you are in a lower tax bracket now than you were during the time the settlement covers.
Read some more info that might indicate that you may need to pay SE taxes on the settlement. What I read was this:
https://www.irs.gov/pub/irs-utl/lawsuitesawardssettlements.pdf
The award could be considered as income from self-employment, meaning another 15.3% in FICA taxes on top of the income tax. Hopefully the IRS is so short-handed that they are ignoring any tax returns where the filer has less than $100k reported to them on W-2 and 1099s. I'm going to completely ignore the SE taxes because of the ruling that Oregon drivers were employees. If the IRS asks, I'll tell them to go after fedex as the employer. I paid the employer AND employee share of FICA taxes, and paid more than my share overall.
Read some more info that might indicate that you may need to pay SE taxes on the settlement. What I read was this:
https://www.irs.gov/pub/irs-utl/lawsuitesawardssettlements.pdf
The award could be considered as income from self-employment, meaning another 15.3% in FICA taxes on top of the income tax. Hopefully the IRS is so short-handed that they are ignoring any tax returns where the filer has less than $100k reported to them on W-2 and 1099s. I'm going to completely ignore the SE taxes because of the ruling that Oregon drivers were employees. If the IRS asks, I'll tell them to go after fedex as the employer. I paid the employer AND employee share of FICA taxes, and paid more than my share overall.
Thank you for pointing me toward the site. The brief overview I managed to give it to this point does seem to say that the award is subject to FICA. I'll have to try to find more in depth information regarding how the settlement is to be treated. Thank you.
Mine was made out to me personally. I was part of the Willis settlement . I don't know which part you were included in. Any way you look at it there clearly appears to be a rush to closure leaving behind a lot of unanswered questions.
dvalleyjim
Well-Known Member
My settlement check was made out to me. I no longer have a business or corporation. I was sent a 1099 misc marked "other income". I do not have to pay and social security or medicare taxes. I will have to claim it as income on my 2017 Federal and State taxes. No way around it. You can't really amend you returns past 3 years. You can try all these things and get audited, then go to tax court. I 1099'ed my employees but that was way over 10 years ago (statute of limitations). I just payed the taxes and it really depressed me for a week because was almost my yearly income. I can't think of any good way to get around it. I guess if you still have a business you could write off more stuff.
Jkloc420
Do you need an air compressor or tire gauge
i dont get it
