Conference 7.286::digital

    What about the last round of TFSO'd employees that recieved weekly
    checks instead of a lump sum?..maybe DEC saw this coming 

    I am curious as to how you (you meaning .0) found out about this 
    "Lump Sum" issue.  My husband was part of the downsizing effort 
    back in 1990 and of course, signed such a document.  In normal
    situations with IRS the statute of limitations is 3 years.  This,
    of course, would mean that he is a little more than a few days
    late and of course quite a few dollars short.
    
    If this is in fact something he should have been entitled to why
    wasn't he and other Digital TFSO participants made aware of this
    fact?
    
    I would be curious as to the ways and means to be able to contact
    this National group that is supposedly representing downsized 
    employees.  Do you have a phone number?
    
    

    Also,
    
    the form 8275 is a disclosure form, what does this have to do with
    this issue?
    
    

    Source of my information is a financial planner in the Washington DC area
    who has a Saturday morning talk show.  He moves through callers pretty
    fast, so .0 was all I could recall at the time.  He usually is very
    reliable, and there are plenty of CPA/Acctng/Legal/Financial/Tax types 
    (Washington is full of 'em) who usually call in to confirm and enlarge
    upon his information.  
    
    After contacting his office today, his secretary informs me that the 
    organization mentioned in .0 is in upper-state New York, and can be 
    reached at 914-266-3556.
    
    If anyone contacts them, please pass on the info here.
    Thanks.

    I called the N.O.D.E at (914)266-3556, They told me that this is not
    yet gone to court, but that they plan to file later this year. you can
    join N.O.D.E. by sending $25. along with your name, address, year
    downsized, and copy of letter that you were required to sign in order
    to getyour lump sum from digital. to the following address:
    
    N.O.D.E.
    P.O.box 47
    RFD1
    Saltpoint.NY. 12578
    
    Also if you were downsized in 1991 you must file your 8275 before April
    15 in order to extend your stat. of limitation.
    
    Ted
    

    do you have to join NODE to file for this possible action ? or is this
    $25 fee to join to help cover the cost of lawyers and such ? otherwise
    sounds kind of scammy to me...
    
    Chris

    What happens if you were downsized before 1991, like 1989 and 1990,
    that is when Digitial did there big one.  How many years is the Sta. 
    of limitations???
    
    Its there anyone is Digital that we can call to get some information on
    this??  I'm going to call that number and see what information I can
    get, something about this doesn't sit right with me, specially when
    they want you to pay 25.00 at front..  But lets keep looking into it,
    because if something un-legal was done is worth the 25.oo for lots of
    people.
    
    Thanks

    Once again. What about the former DEC employees that have been "right
    sized" since July 1994? They too were required to sign a "legal" paper
    to receive a "weakly" settlement. 

    From what I was told, you can request an information packet from
    N.O.D.E. without having to become a member. You can call the
    (914)266-3556 and request this packet. The $25. does go towards paying
    legal fees, as well as getting you constant updates in the form of a
    news letter. The Stat. of limitations is 3 tax years, meaning that
    those TFSO'ed in 1991 would have to file the form 8275 by jan. 15 of
    this year. If anyone else makes this call and find additional info,
    please post it.
    
    Thanks
    Ted
    

    I called N.O.D.E... They were willing to send the information and the
    quarterly newsletter for $25. This group is "tracking" a suit getting
    underway with the IRS. "The" lawyers are still adding clients until
    4/15/95. The legal fee is $600 + 5% of "winnings"; this covers all costs
    up through the Supreme Court.
    
    The suit is based on age discrimination. I'm 30 and left IBM in 1993.
    I was told that I would not be accepted by the lawyers since I'm under
    40. The gentleman also mentioned something about Social Security Tax
    that I should not have paid... (small potatoes)

  I agree: the connection between .0 and the next to last reply is quite fuzzy.
I guess we will have to wait until someone gets the written material. I think
it's worth one or two of us blindly sending $25 to this address. I would not
recommend that a large number of people do this until we know more about this
organization.

    Does anyone have any information or heard anything about a pending
    class action suit against the IRS by some people from IBM and other
    companies regarding the taxation of lump-sums as ordinary income rather
    than severance pay.  The over-tax is substantial in some cases.            
    
    Apparently there is one going on somewhere out there.
    
    My understanding is that other ex-DECies(like my father) might have had 
    this done to them and might be able to be a part of this suit.  Lord knows 
    the IRS screws people enough already.
    
    If anyone has any information regarding this suit or other leads, my
    father would appreciate it.
    
    Thanks,
    Dave
    
                                                                    

    Dave,
    
    We checked into it this year to see if my wife would benefit from the
    lump sum issue (TFSO, class of 1991). I had the IRS send us the forms,
    but my wife did not meet some of the criteria. I don't recall it being
    a class action suit, but rather a redefinition of how the IRS would
    treat lump sum transition payouts. That may be one of the reasons why
    Digital changed its policy/practice of making weekly TFSO payments.
    
    I think there might have been other topics in here that referenced the
    IRS form that was necessary.
    
    
    
    hth,
    
    Kevin

Why would a transition payment NOT be ordinary income (in a taxation sense)?

Is the concern is that a large lump sum payment is subject to withholding 
as if the multi-week amount were considered a one week pay (and pushes
the marginal withholding RATE to the max)? 
Is that not remedied when you file your ANNUAL taxes and the total tax due
is computed regardless of how many weeks it was received over?

For example, is the scenario that....

A $52,000 per year person receiving a ten-week lump sum ($10,000)
in one check, and being taxed as if his annual pay were $520,000?
Let's say he gets half the lump sum, $5000, withheld for  Federal taxes.
Let's say he'd normally be withheld at 15%, or $1500.
He's overpaid his taxes in the short term by $3500.
When he files the following winter/spring, he will report his actual 
earnings for the year, say between $40,000 and $60,000, depending 
on when during the year he was laid off and whether he got new work.
Won't the $3500 short term overpayment just be returned in a refund?

Is there more to it than this?  Is somebody losing more than the 
effective interest on the short term overwithholding?
What is the suit seeking?

- tom]

>>                      <<< Note 4007.2 by REGENT::POWERS >>>

>>Is there more to it than this?  Is somebody losing more than the 
>>effective interest on the short term overwithholding?
>>What is the suit seeking?

Yes,  in some case the "lump sum" could be a "settlement" so the
employee wouldn't sue for damages.  "settlements" aren't usually taxable.

Garry

    I believe the lump some payment had something to do with signing an
    agreement not to sue IBM in the future claiming any kind of "firing
    discrimination".  Some who signed are now trying to sue IBM claiming
    they were discriminated against (age) when they were TSFOed.  I believe
    they are using the IRS as a vehicle to get their claims into the
    courts.  Of course IBM is fighting this tooth and nail.

    re .2
    Why would a transition payment NOT be ordinary income (in a taxation
    sense)?
    
    I recall the ex-IBM employee suit was based on age discrimination,
    and that the separation payments were viewed by them as a payment
    from IBM that was the equivalent of an age discrimation award.
    So happens that such awards are exempt from taxes.
    
    IMHO, I don't think they have a leg to stand on.  k
    

    Notes collision... ;-)
    

    .3 and .4 have most of it.  The lump sum has been treated by the IRS
    (and Digital and IBM) as salary continuation (which is taxable) because
    the amount was based on length of service.  HOWEVER, Digital's TFSO
    agreement makes NO mention of salary continuation and never uses the
    word "severance."  Furthermore, the link of the lump sum to the
    agreement not to sue Digital was made abundantly clear by the warning
    that if the agreement was not signed and returned with XX days, the
    lump sum would not be paid.  Length of service issues notwithstanding,
    that makes it a settlement, not salary, and it should not have been
    taxed.  I believe the IBM case is similar.  Pending cases of age
    discrimination are another matter.

    Another angle to this is that the payments at DEC were processed
    through payroll and thus in many cases incurred social security taxes,
    which are only supposed to be taken from wages (vs. settlements).  I
    tried to argue this in vain with the powers that be back in 1990 when
    my wife was TFSO'd...

    
    
    	A friend of mine from Dallas that was TFSO'd a year or so ago had
    	been following this closely.  His information was that the ex-IBM
    	employees had won the original case, but the IRS appealed and won,
    	and that the employees appealed that.  He was waiting for this last
    	appeal to be completed.
    
    	I'd like to know the final resolution as well because my husband
    	was TFSO'd a year ago, and we'd like to get back the taxes we paid.
    
    	Diane

    Moderators, feel free to append these replies to 3717,
    where this discussion has already taken place.

Re: .21 - Does anyone have any updates on this issue?

Art

    
    
    	I just saw an article in today's Boston Globe, business section,
    	headline reads: 
    
    		FORMER IBM WORKERS SUE IRS FOR $20M REFUND
    
    	Portland, Ore. - Former employees of International Business
    Machines Corp. yesterday files suit against the Internal Revenue
    Service for about $20 million in tax refunds, the law firm representing
    the plaintiffs said.
    
    	The suit, filed in federal district court in Binghamton, NY,
    centers around the contention that the layoffs of more than 120,000
    employees since 1992 created emotional and physical pain and suffering.
    
    	IBM's severance payments meant it avoided personal injury claims
    and lawsuits, settlements of which are tax-free, said the Portland,
    Ore.-based law firm, Ball, Janik & Novack.
    
    	IBM declined to comment.
    
    	The suit seeks to recover about $20 million in tax refunds for 750
    former employees living in central New York state, who paid taxes on
    their settlement checks, the firm's statement added.
    
    	The consolidated action was filed by a nationwide litigation group
    of more than 3,000 former employees and is the first in a series of
    actions they expect to file.
    
    Reproduced without permission of the Globe.
    
    	So, watch the news for the results of this, and subsequent, cases.

    Follow up on reply .24:
    
    Similar article from USA Today on 3/29/96, copied without permission:
    
    About 750 former IBM employees sued the IRS Thursday for $15 million in
    refunds of taxes paid on buyout settlements.
    
    The forms employees say the settlements weren't income and shouldn't
    have been taxed.  The average refund would be $20,000.
    
    Before getting their settlement checks, employees had to sign papers
    promising not to sue IBM - a common practice when corporations
    downsize.
    
    That show IBM viewed the payments as compensation for pain and
    suffering caused by job losses, the lawsuit contends.  Such payments
    are tax-exempt.
    
    An Internal Revenue Service spokesman declined to comment.
    
    The lawsuit, files in federal district court in Binghampton, N.Y.,
    appears to be the first of several.
    
    At least 3,000 former IBM employees are expected to sue the IRS, says
    lawer James McDermott of Ball, Janik & Novack in Portland, Ore.
    
    But the lawsuit isn't a class action.  To be involved, people who've
    lost jobs at IBM since 1992 must file an amended tax return claiming
    the refund.  They they have to pay $600 to Ball, Janik & Novack.  The
    law firm estimates 120,000 people are eligible.
    
    People wanting more information can call 503-228-2525 or send names and
    addresses by electronic mail to downsize@bjn.com.
    
    *** This is provided for information only!  It is not a recommendation
    by David Corbishley as the poster of this note, the moderators, or
    Digital Equipment Corporation, of the law firm mentioned in the article
    or of specific actions in the article.
    
    *** Seek professional advice before taking any actions or paying any
    funds.