How to handle High Tech Employee class action settlement?

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Rich

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Jul 10, 2021, 10:34:35 AMJul 10
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Relative got an approx $2000 check in *2020* as part of the High Tech
Employee class action case. The check came with a *2015* W-2 and
a *2015* 1099-MISC with Box 3 Other income.

Do they really need to go and amend their 2015 return at this point?
Or can they just wait for the IRS to notice (if it does) and bill them?

Thanks!

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Alan

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Jul 10, 2021, 3:44:52 PMJul 10
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On 7/10/21 7:32 AM, Rich wrote:
> Relative got an approx $2000 check in *2020* as part of the High Tech
> Employee class action case. The check came with a *2015* W-2 and
> a *2015* 1099-MISC with Box 3 Other income.
>
> Do they really need to go and amend their 2015 return at this point?
> Or can they just wait for the IRS to notice (if it does) and bill them?
>
> Thanks!
>
I am going to assume that you are referring to the class action suit
against Adobe, Google, Apple, Intuit and a few other companies claiming
they colluded to not actively seek each others employees. The suit was
settled in 2015. The settlement funds were distributed in 2015 with a
W-2 and a 1099-MISC included with the check. 1/3 of the settlement was
wages on the W-2. The 2015 payments should have been reported on the
2015 tax return as wages and other income. I am guessing that the 2020
distribution was sourced from a reserve that was not distributed in 2015.

This distribution (given the above assumptions) is 2020 taxable income
to the recipient. IMHO those IRS Forms should have said 2020 and not
2015. They are 2020 taxable income as the recipient received the
payment in 2020 and was never in construction receipt of that amount
prior to 2020.

ira smilovitz

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Jul 11, 2021, 9:31:00 AMJul 11
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On Saturday, July 10, 2021 at 3:44:52 PM UTC-4, Alan wrote:
> On 7/10/21 7:32 AM, Rich wrote:
> > Relative got an approx $2000 check in *2020* as part of the High Tech
> > Employee class action case. The check came with a *2015* W-2 and
> > a *2015* 1099-MISC with Box 3 Other income.
> >
> > Do they really need to go and amend their 2015 return at this point?
> > Or can they just wait for the IRS to notice (if it does) and bill them?
> >
> > Thanks!
> >
> I am going to assume that you are referring to the class action suit
> against Adobe, Google, Apple, Intuit and a few other companies claiming
> they colluded to not actively seek each others employees. The suit was
> settled in 2015. The settlement funds were distributed in 2015 with a
> W-2 and a 1099-MISC included with the check. 1/3 of the settlement was
> wages on the W-2. The 2015 payments should have been reported on the
> 2015 tax return as wages and other income. I am guessing that the 2020
> distribution was sourced from a reserve that was not distributed in 2015.
>
> This distribution (given the above assumptions) is 2020 taxable income
> to the recipient. IMHO those IRS Forms should have said 2020 and not
> 2015. They are 2020 taxable income as the recipient received the
> payment in 2020 and was never in construction receipt of that amount
> prior to 2020.
> --

Another, albeit slim, possibility is that the 2020 check was a replacement of the 2015 payment which was still outstanding. If so, reissuing of the 2015 tax documents would be in order.

Ira Smilovitz, EA
Leonia, NJ

Rick

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Jul 11, 2021, 10:21:03 AMJul 11
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"ira smilovitz" wrote in message
news:0a3efc51-48f1-48cb...@googlegroups.com...
But assuming they cash the check, is it reasonable for anyone to expect them
to file an amended return 6 years later for what is probably a very small
portion of their income? It is well beyond the normal three-year limit for
non-fraud.

Also, if for whatever reason they choose not to cash the check (or they
perhaps sign it over to a charity), is it still considered income?

--

BignTall

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Jul 11, 2021, 11:41:50 PMJul 11
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On 7/10/2021 9:32 AM, Rich wrote:
> Relative got an approx $2000 check in *2020* as part of the High Tech
> Employee class action case. The check came with a *2015* W-2 and
> a *2015* 1099-MISC with Box 3 Other income.
>
> Do they really need to go and amend their 2015 return at this point?
> Or can they just wait for the IRS to notice (if it does) and bill them?
>
> Thanks!
>
In 2020, if the IRS received W-2 and 1099-MISC filings (why did your
friend receive both a W-2 and 1099-MISC?) for $2000 of 2015 income, I
would expect the IRS to more or less ignore the information. By 2020,
the general 3 year the statute of limitations for timely filed 2015
returns has expired. None of the exceptions that extend the SOL to 6
years or infinity are in evidence here. Even if your friend goes to the
effort to file an amended return for 2015 and pay the newly calculated
taxes due, the IRS may well reject the amended return as untimely filed
and return the 'over payment'. This seems like a "let sleeping dogs
lie" situation.

ira smilovitz

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Jul 12, 2021, 1:36:57 AMJul 12
to
On Sunday, July 11, 2021 at 11:41:50 PM UTC-4, BignTall wrote:
> On 7/10/2021 9:32 AM, Rich wrote:
> > Relative got an approx $2000 check in *2020* as part of the High Tech
> > Employee class action case. The check came with a *2015* W-2 and
> > a *2015* 1099-MISC with Box 3 Other income.
> >
> > Do they really need to go and amend their 2015 return at this point?
> > Or can they just wait for the IRS to notice (if it does) and bill them?
> >
> > Thanks!
> >
> In 2020, if the IRS received W-2 and 1099-MISC filings (why did your
> friend receive both a W-2 and 1099-MISC?) for $2000 of 2015 income, I
> would expect the IRS to more or less ignore the information. By 2020,
> the general 3 year the statute of limitations for timely filed 2015
> returns has expired. None of the exceptions that extend the SOL to 6
> years or infinity are in evidence here. Even if your friend goes to the
> effort to file an amended return for 2015 and pay the newly calculated
> taxes due, the IRS may well reject the amended return as untimely filed
> and return the 'over payment'. This seems like a "let sleeping dogs
> lie" situation.
> --

Starting at the top - both a W-2 and a 1099-MISC were issued because part of the settlement was deemed to be wages that weren't paid due to the collusion between the tech companies and part was an additional award of damages. The 1099-MISC amount was probably exempt from Social Security and Medicare tax. In my scenario, I should have made it clear that I assumed the 2015 tax documents were sent, not as "new" IRS filings, but just as part of the package that had orignially been sent in 2015. It is highly unlikely that these documents were filed with the IRS in 2020, because had they been, the issuer would have been subject to penalties for late filing of documents that were supposed to be filed by January 31, 2016 (or somewhat later if filed electronically).
If interested, the taxpayer can determine this by requesting a Wage and Income Transcript for 2015. If the documents are listed on the transcript, they were filed timely for the 2015 tax year. If they are absent, this would be a new filing. (My understanding is that the IRS does not update the Wage and Income Transcript indefinitely.)

As to the rest of your answer, I agree with you. The IRS would ignore an amended 2015 return in most cases. In fact, I would guess that even if the check had been lost, the taxpayer reported the settlement on his 2015 tax return. Had he not done so, he should have recevied a CP2000 notice when the IRS computers did their document matching in mid 2016.

Ira Smilovitz, EA
Leonia, NJ

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