Yes. Back wages are taxable as income, since if they were earned as wages during your employment, you would be taxed on them. Also, since you are required to pay taxes on the entire amount of your income in any given year, if you receive a lump-sum award for several years of lost back pay, you often will pay taxes at a higher rate than if you had earned that pay over a several year period. There currently is no way to average out your award so that you only pay taxes at the rate you would have paid had you still been employed.