Tax laws can be complicated in some areas. There may be various reasons why you owe taxes on a particular sum, even though that might seem counter-intuitive or just plain wrong. For example, what about attorneys’ fees and court costs in a successful workplace discrimination lawsuit? Currently, you could owe taxes on sums even though that money went to someone else. However, if a group of New Jersey legislators are successful, that will change. Senate Bill 784 would change the tax laws and end the double-taxation of attorneys’ fees in your employment discrimination case. Whether or not this new bill becomes law, you should not let the tax laws discourage you from seeking to protect your rights if you’ve suffered from discrimination at work. Contact a knowledgeable New Jersey employment discrimination attorney to discuss which options are available to you.
Imagine it: you were harmed professionally due to workplace discrimination. You retained skilled counsel to represent you. You sued in court under the Law Against Discrimination, and you won. The trial court awarded you compensation for your damages. Your attorney, having represented you diligently and successfully, was owed for the work he or she provided, and you happily paid. However, when tax time comes around, you discover that you owe taxes for an amount that never went to you but instead went to your attorney. (FYI, not only did you pay taxes on that amount, but your attorney did as well.)
SB 784, sponsored by three Republicans and one Democrat, would change that. The federal government has already taken action to fix this problem in federal litigation. In 2004, President Bush signed into law the Civil Rights Tax Relief Act, a bill that gave litigants a tax deduction that wiped out the tax obligations they previously owed. Under the modified federal law, attorneys’ fees in cases like employment discrimination actions are subject only to single taxation, which is paid by the attorney who actually received that money.