Straight-80 Lawsuits
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The Agency has finally begun issuing Forms 1099 for the Taddeo lawsuit. At this time, it remains unclear whether 1099s have been issued for the Geisse lawsuit yet. The Agency is significantly late in distributing these forms, which appears to breach the terms of the settlement agreements and may also violate IRS regulations requiring that such forms be mailed no later than 02/02/2026.
That said, the underlying claims in these FLSA cases centered on the Agency’s chronic delays in paying overtime compensation, therefore it is perhaps not surprising that the Agency has continued this pattern of noncompliance with Federal regulations by missing the 1099 deadline by two months.
I am posting this to address concerns raised by several plaintiffs who believe the amounts reported on their 1099s are incorrect or unclear.
The Agency has included, on each plaintiff’s 1099, legal fees paid directly to the law firm. These fees were allocated proportionally based on the time spent by the attorneys on each plaintiff’s claim and vary widely from approximately $10 to over $5,300 in at least one case. These amounts were paid directly by the Government to the law firm as part of the settlement and are separate from the 25% contingency fee agreement between each plaintiff and the firm.
Legal fees paid directly to the law firm by the Government as well as those deducted under the contingency fee agreement are deductible as an above-the-line deduction on Schedule 1, Line 24.h (“Attorney fees and court costs for actions involving certain unlawful discrimination claims”).
The Tax Code defines "unlawful discrimination claims" broadly to include claims brought against the Government under the FLSA (such as these lawsuits).
26 US Code Sec. 62(a) defines "adjustable gross income." Subparagraph 20 states that the following can be deducted from AGI:
"Any deduction allowable under this chapter for attorney fees and court costs paid by, or on behalf of, the taxpayer in connection with any action involving a claim of unlawful discrimination as defined in subsection (e) (...)"
Subsection (e):
For purposes of subsection (a)(20), the term “unlawful discrimination” means an act that is unlawful under any of the following:
(4) The Fair Labor Standards Act of 1938 (29 U.S.C. 201 et seq.)
The final settlement agreements for both the Taddeo and Geisse cases include detailed breakdowns of each plaintiff’s payment amounts, legal fees, 1099 totals, and mailing addresses. Due to privacy concerns, I will not post those documents publicly but I am happy to help verify individual amounts upon request. You may send me a direct message with your last name and the total reported on your 1099 (for verification purposes), and I will provide the amounts listed in the settlement agreement. Contacting me is not necessary, however. You can calculate your total legal fees on your own as follows:
If a plaintiff received a 1099 reporting $2,100, but received a net payment of $1,275 from the law firm, the difference reflects TOTAL legal fees. For instance, if the total liquidated damages were $1,700 and the firm retained 25% ($425), and the Agency separately paid $400 in legal fees on that plaintiff’s behalf, the total legal fees would be $825. By deducting the full $825 on Schedule 1, Line 24.h, the plaintiff will only pay income tax on the portion of the net recovery of $1,275.
DISCLAIMER: I am neither an attorney nor an accountant, and you should verify the general information provided in this post before you rely on it to file your taxes. Nothing in this post should be construed as tax or legal advice.
That said, the underlying claims in these FLSA cases centered on the Agency’s chronic delays in paying overtime compensation, therefore it is perhaps not surprising that the Agency has continued this pattern of noncompliance with Federal regulations by missing the 1099 deadline by two months.
I am posting this to address concerns raised by several plaintiffs who believe the amounts reported on their 1099s are incorrect or unclear.
The Agency has included, on each plaintiff’s 1099, legal fees paid directly to the law firm. These fees were allocated proportionally based on the time spent by the attorneys on each plaintiff’s claim and vary widely from approximately $10 to over $5,300 in at least one case. These amounts were paid directly by the Government to the law firm as part of the settlement and are separate from the 25% contingency fee agreement between each plaintiff and the firm.
Legal fees paid directly to the law firm by the Government as well as those deducted under the contingency fee agreement are deductible as an above-the-line deduction on Schedule 1, Line 24.h (“Attorney fees and court costs for actions involving certain unlawful discrimination claims”).
The Tax Code defines "unlawful discrimination claims" broadly to include claims brought against the Government under the FLSA (such as these lawsuits).
26 US Code Sec. 62(a) defines "adjustable gross income." Subparagraph 20 states that the following can be deducted from AGI:
"Any deduction allowable under this chapter for attorney fees and court costs paid by, or on behalf of, the taxpayer in connection with any action involving a claim of unlawful discrimination as defined in subsection (e) (...)"
Subsection (e):
For purposes of subsection (a)(20), the term “unlawful discrimination” means an act that is unlawful under any of the following:
(4) The Fair Labor Standards Act of 1938 (29 U.S.C. 201 et seq.)
The final settlement agreements for both the Taddeo and Geisse cases include detailed breakdowns of each plaintiff’s payment amounts, legal fees, 1099 totals, and mailing addresses. Due to privacy concerns, I will not post those documents publicly but I am happy to help verify individual amounts upon request. You may send me a direct message with your last name and the total reported on your 1099 (for verification purposes), and I will provide the amounts listed in the settlement agreement. Contacting me is not necessary, however. You can calculate your total legal fees on your own as follows:
If a plaintiff received a 1099 reporting $2,100, but received a net payment of $1,275 from the law firm, the difference reflects TOTAL legal fees. For instance, if the total liquidated damages were $1,700 and the firm retained 25% ($425), and the Agency separately paid $400 in legal fees on that plaintiff’s behalf, the total legal fees would be $825. By deducting the full $825 on Schedule 1, Line 24.h, the plaintiff will only pay income tax on the portion of the net recovery of $1,275.
DISCLAIMER: I am neither an attorney nor an accountant, and you should verify the general information provided in this post before you rely on it to file your taxes. Nothing in this post should be construed as tax or legal advice.
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