Taxation of emotional distress payments can be tricky. In general, the settlement money is taxable ... but not always.
Amounts paid to a person for emotional distress are considered taxable income, as a taxpayer learned in Tax Court today (Thursday). The taxpayer, a Julie McGowen, suffered emotional distress at a job she was working at in California. As the Tax Court ruling explains, one of Ms. McGowen's co-workers was apparently not pleasant to work with: From [...]