2/17/26 Sending Tax Forms Post-Settlement

February 17, 2026

Tax season is rolling around, and while employers are issuing 2025 W-2s for their current employees, they should remember to also issue any tax forms associated with settlement payments that the company paid in the 2025 tax year. 

If an employer made a settlement payment in the 2025 tax year, they must provide a W-2 tax form and/or 1099 tax form to the settlement recipient by the applicable deadline. Notably, this requirement applies to any settlement payment that was made in the 2025 tax year, even if the settlement agreement was signed in 2024. For example, if a settlement agreement was signed in December of 2024, but payment was not made until January of 2025, the employer will need to issue 2025 tax forms to the settlement recipient. 

Employers should also ensure that they are issuing the appropriate tax forms for the type of settlement that was paid. Generally, a settlement payment that is classified as wage income will require a W-2 tax form, and a settlement payment that is classified as non-wage income (e.g., emotional distress damages) will require a 1099 tax form. Employers should review the terms of the settlement agreement to identify the correct tax forms to send to the settlement recipient.

For questions regarding sending tax forms for settlement payments, contact Andrew Schpak at 503-276-2156 or aschpak@barran.com, or Ashley Korkeakoski-Sears at 503-276-2132 or asears@barran.com.