Settlement was paid like current employee

You need a tax attorney or CPA to go over this with you. Settlements are taxed in complicated ways because our tax code is exceedingly complex. Compensatory damages, restitution, punitive damages -- these are all different categories and have different methods of taxation. It's far from easy, but this is why Americans spend billions of dollars every year paying lawyers and accountants to help them follow the tax code.

Unfortunately, unless some part of your settlement involves compensation for personal injury, it is fully taxable as wages. However, there is a possibility that an excess amount of tax was withheld that you can claim a refund for when you file your tax return. The payroll tax withholding tables are set up to make sure you are fully withheld and assume a higher applicable tax rate for higher lump sum payments. Remember, the taxes were withheld on your behalf and it's up to you, preferably with the help of a tax professional, to determine how much tax is due for the settlement and your other income in the year of receipt. In my experience, there is often a significant tax refund available to someone in your situation. I strongly encourage you to retain a tax professional like a CPA or tax lawyer to help you calculate your tax obligations and determine if you have a refund waiting for you.