dvalleyjim
Well-Known Member
Oh, I'm west coast.
Alexander vs. Fedex Willis vs. Fedex
- Thread starter bacha29
- Start date
Seriously, what don't you understand?
Jkloc420
Do you need an air compressor or tire gauge
It doesn't really matter if you no longer have a business. The income is from employment, and subject to employment taxes. Being on the 'west coast' you might have also been determined to be an employee in California. I seem to remember a ruling in the 9th circuit that applied to CA as well as Oregon. I know Oregon state court also made a decision that forced fedex to settle the case before it went to court.
It is likely that if you were ruled an employee, and went back and recomputed your taxes, the Social Security portion would be nearly a wash, since fedex should have been paying 7.75% on your total income, instead of you paying 15.6% on your net income. Unless your expenses were much over 1/2 your gross income, you wouldn't owe much, and in my case, my three drivers were also ruled as fedex employees in a state case(I had given them 1099s) so fedex would owe taxes on what I paid them with NO deductions, and the drivers would owe their share.
I am sure that I SHOULD count the settlement as employment income, but in my case, the amount I might owe would be tiny, and if pushed, I could probably dig up paperwork showing that I overpaid SE taxes during years I was actually an employee. I am going to ignore the FICA tax aspect and hope that my income is so low that the IRS doesn't waste their time even looking at it.
If I had gotten $200k or something big, I'd be more concerned.
I started thinking about the ruling. Your award could, maybe should be considered as employment income, reportable on schedule C, since it was an award for back illegal deductions. It was an award for SOMETHING related to work, making it employment income. I think that you could deduct a lot, maybe all of it into some kind of retirement plan like an SEP, and reduce it enough to hopefully owe no taxes. Between the standard deduction and the personal exemption, you can deduct basically $11,000 from the award, plus $6500 for IRA deduction, and only owe on the amount above $17,500. I know my total Social Security is tax free, maybe yours as well. I'd look at how counting the award as income on Schedule C might help or hurt you. If you can also deduct 20% of the award in a SEP, plus whatever for a regular IRA, plus the make-up contribution, it might be worth paying a small amount for FICA taxes.
Thank you for your efforts regarding this matter. Here is what I found. Publication 590 sets forth what is considered to be "qualified income" as it pertains to IRA contributions and class action awards are not considered "qualified income". In addition my payment was reported on 1099MISC Box 3. The rules that govern Box 3 describes the types of income that can be reported on Box 3 . Among those rules it states that it can be used to replace income that was lost. Now if you think about it the payment we received from the East Coast settlement was meant to replace income that was lost from deductions they took scanners uniforms claims etc which back then would have resulted in a higher net profit . Now what makes the East Coast settlement tough is that the question of whether or not we were employees as it pertains to the East Coast consolidated class action suits was never brought before the 7th US Circuit Court of Appeals to answer which in turn allows Judge Miller the lower federal court judge's ruling that we were contractors to stand. Likewise since the award could not for certain be considered self employment and even if it was all you're doing is sheltering $6500 while exposing the entire balance to SE tax. In our situation what's the sense in doing that? Likewise if considered self employment and we're receiving SSD we could be considered in violation of the SSD rules. Imagine the fight we would be in for with that? In addition if it was without question income subject to SE it would have been reported in Box 7 of the 1099 MISC. I asked Judge Miller for an itemized accounting of the settlement recognizing the amounts received on an annual basis but he refused .Then again given the not so pleasant experiences we had your inclined to be thankful just to able to get out of that nightmare with at least something. .
Funny how that IRS notice I referred you to earlier says that the award needs to be counted as employment income (whether as an employee or contractor doesn't matter). Depending on the size of the award, $6500 could be a huge or tiny percentage. As far as disability goes, they would accept the explanation that it was for previous years and not count it a work income. But again, depending on the size of your award, it could make all or part of your social security income taxable. Technically, it should be taxed, since it is income, but if it bumps you into a higher tax bracket than you were in when you were working, it is a bit unfair. And even at that, since you were never found to be an employee, paying FICA taxes on the amount is fair unless you paid the maximum possible earlier.
I personally was fairly satisfied with the income I was earning, even though I was disgusted with the emloyee conditions. I had been self-employed for over a decade before I started with Fedex HD.
It was nothing like the promises made at the recruiting meeting prior to the HD start-up date. The lies from those meetings and the unilateral contract changes got me upset within just a few months.
Fedex should have been required to reimburse everyone for taxes on the settlement since they got away without paying any of the employment taxes at the time. Getting reimbursed for illegal deductions isn't even close to what they saved in state and federal employment taxes.
I personally was fairly satisfied with the income I was earning, even though I was disgusted with the emloyee conditions. I had been self-employed for over a decade before I started with Fedex HD.
It was nothing like the promises made at the recruiting meeting prior to the HD start-up date. The lies from those meetings and the unilateral contract changes got me upset within just a few months.
Fedex should have been required to reimburse everyone for taxes on the settlement since they got away without paying any of the employment taxes at the time. Getting reimbursed for illegal deductions isn't even close to what they saved in state and federal employment taxes.
Again it's Box 3 versus Box 7 income. Now to do it your way declaring it FICA subjected self employment income simply to postpone not eliminate taxes on just 6500$ but exposing the rest to FIT and FICA would cost me in excess of $5000 in additional tax which would take awhile to recoup using the modest uptick in Social Security
Remember too almost every American is designated a cash basis calendar year taxpayer and this settlement in the interest of expediency was dumped into just one year and even if we could have gone back and amended for each one of those years we would have had to pay interest on the unpaid balance for all those years which would have been considerable given the time line.
Well. we looked at every known lawful angle but this was a case where it was " here's your settlement , next" frame of mind that was only focused on moving the court docket along a quickly as possible. Given the protections from future class actions this settlement has afforded XG it will no doubt embolden them to take an even harder line with contractors in the future. It is for that reason I remind contractors who remain that there's a strong possibility that they'll never escape from this nightmare under better terms than what they have right now.
eastcoastguy
Member
Hi, came across these threads, and I am on east coast as well. I was trying to determine how to enter the settlement for taxes. So, what is your final. I was hoping to just report it as "other" income line 21. I'm on SSD as well, no longer working. Do we have to report that as biz income, etc? or can we just report it as other income? Thx
eastcoastguy
Member
I was a HD contractor, but only drove it myself. I fell under the Westcott vs. Fedex sttlmnt. I too got the check in MY NAME, not biz... and Box 3. I'm really stressed over this...cancer survivor, had to retire...really wanted to do the taxes myself, and avoid the accountants. To be blunt, I am broke except for these funds...just looking for an answer, thx
Scroll down the discussions board to the updated information. As for myself I will report it as "other income" . I explained in the UPDATE that based on an IRS audit guideline the potential is there for the IRS to want FICA (social security) based on the nature of the claims set forth by the plaintiffs. In the meantime I will also report under "other income" and wait to see what happens. Keep in mind one thing. You could be subject to penalty for underpayment of taxes. The penalty comes in the form of interest because you are required to have 90% of your overall tax liability payed in by the end of the calendar year. These however an exception. If you paid in during 2017 an amount equal to your 2016 lax liability the penalty is waived. Hope you are recovering well. I too at the advice of a qualified opinion went on SSD. Double hip joint replacement. Absolutely stunned when my first application went through in just 3 months.
eastcoastguy
Member
Thx for asking, doing ok, no cancer, but side effects are pretty bad at times. Yes, you were lucky getting SSD the first time, I had to get a lawyer the 2nd time. Did you get Medicare? After being on SSD for 2 years, you are elligible.
So, you are just going to report it on 1040 line 21? That's what I was hoping for. I made estimated payments for 2017 when I got the check, and some rest of year, so I should be ok if I can do it that way.
So, you are just going to report it on 1040 line 21? That's what I was hoping for. I made estimated payments for 2017 when I got the check, and some rest of year, so I should be ok if I can do it that way.
I did and yes I was very fortunate plus the fact that I was 62 at the time and had 44 years of reported earnings. In addition I am fortunate to live with the network of a very good regional healthcare system that offers a good Medicare Advantage plan. Annual deductible $700 Maximum annual out of pocket $4000. Very good drug plan Monthly premium $22 .
eastcoastguy
Member
copied this from Westcott vs. Fedex settlement. See items in BOLD print at the end
G.
Income Tax Obligations
The Settlement Payment is allocated by the Parties to compensat
e for the reimbursement
of expenses (whether deducted fr
om contractual payments to Plai
ntiff or paid separately by
Plaintiff) and interest. No representation has been made to the
Plaintiff, Class Members, or their
attorneys by FXG regarding the taxability of any portion of the
payments under this Agreement.
Plaintiff, Class Members, and Cl
ass Counsel are solely responsi
ble for their own tax filing and
payment obligations arising from this Agreement, except that th
e Settlement Administrator will
provide Plaintiff, Class Members, and Class Counsel with copies
of IRS Forms 1099 for any
payments the Class Settlement Fund makes to them under this Agr
eement.
If any taxing
authority imposes employment taxes because any portion of the S
ettlement Payment is
determined to be taxable wages, the Settlement Administrator sh
all be responsible for the
employer share of such taxes. However, as between the Parties,
FXG agrees that it is responsible
for the employer share of such taxes rather than Plaintiff or C
lass Members. Nothing in this
paragraph is intended to alter the duties of the Settlement Adm
inistrator set forth in this
Agreement.
G.
Income Tax Obligations
The Settlement Payment is allocated by the Parties to compensat
e for the reimbursement
of expenses (whether deducted fr
om contractual payments to Plai
ntiff or paid separately by
Plaintiff) and interest. No representation has been made to the
Plaintiff, Class Members, or their
attorneys by FXG regarding the taxability of any portion of the
payments under this Agreement.
Plaintiff, Class Members, and Cl
ass Counsel are solely responsi
ble for their own tax filing and
payment obligations arising from this Agreement, except that th
e Settlement Administrator will
provide Plaintiff, Class Members, and Class Counsel with copies
of IRS Forms 1099 for any
payments the Class Settlement Fund makes to them under this Agr
eement.
If any taxing
authority imposes employment taxes because any portion of the S
ettlement Payment is
determined to be taxable wages, the Settlement Administrator sh
all be responsible for the
employer share of such taxes. However, as between the Parties,
FXG agrees that it is responsible
for the employer share of such taxes rather than Plaintiff or C
lass Members. Nothing in this
paragraph is intended to alter the duties of the Settlement Adm
inistrator set forth in this
Agreement.
As I pointed out in the UPDATE if a taxing authority which could include states who want UC tax payed on the settlement decides to proclaim the settlement as wages which falls under the title of "earned income" X agrees to pick up the employer share. Now the question would be is that liability limited to only the employers share of FICA which would be one half (7.65%) ? What about state UC tax and local municipality earned income taxes better known in my state as "wage tax" and is 1% plus a annual $52.00 Do they agree to pay that tax as well? . It would appear that you are thinking the same thing I'm thinking. This thing may not be over yet. I talked to an IRS agent asking if I could go back and amend my returns for the years in question 2001-2007 pay the additional tax in the hope that my monthly benefit could be ticked up a notch or two. Flat out denied. I'm going to report my settlement as " other income" pay the FIT only then wait to see what happens . Keep in mind . The total taxable combined payout to this point in both the East Coast and West Coast settlements was about 450 million. So there's a lot of FICA UC and local and somebody may decide that it's worthwhile going after.
eastcoastguy
Member
Let's hope they don't, haha...I'm in Maryland, and Judge Miller ruled no change in classification, BASED ON MARYLAND LAW, we are still viewed as Contractors. The entry I made is from Miller's statement in the Maryland settlement only. It seems there are differences across the country. Not to be stupid...I get most of your abbreviations, but what is UC Tax?
And thx for your responses. I will only ask your clarification on filing once more. Is it on line 21 of 1040 you are making the entry?
And thx for your responses. I will only ask your clarification on filing once more. Is it on line 21 of 1040 you are making the entry?
Yes, I'm putting it on line 21 "other income" but setting some cash aside in case taxes other than FIT and state are assessed. UC stands for unemployment compensation and some states have in the past had to borrow money from the federal government to pay benefits . I still can't understand why Miller was chosen to oversee the out of court settlement when he was the federal judge who ruled that plaintiffs in the case were contractors. He should have recused himself.Then again out of 1200 class members in my state I was 1 of only 2 who filed formal objections to the settlement terms. Miller did send me a polite but one of those "read between the lines" letters that was worded in a such a way that left little doubt that he feared the ferocity by which X fought the case and that we would have little to no chance in front of the Seventh District U.S. Court of Appeals. At the same time the West Coast case went all the way up to the Ninth District Court of Appeals and the contractors won.
eastcoastguy
Member
Thx...that was my guess as to UC, wasn't sure. Funny, Miller admitted it took him weeks to do what a local MD judge could have done a lot quicker. I guess that tells you they were tired of messing with it. He admitted that we could have still contested the "contractor" ruling, but that would have taken another trial. Anyway, I'm happy that I got something. Thanks again for all your help, ps....sounds like we are in the same age bracket...will check in from time to time, nice talking to you.
