Tuesday, January 14, 2014

Do I have to pay Taxes on my Personal Injury Settlement?

One of the greatest parts of being a personal injury attorney is handing my client the check after the case is over, either due to settlement or after T
rial.  Whether the check is in the thousands of the Hundreds of Thousands, one of the most important questions that comes up is:  "Do I have to pay taxes on this?"

The answer is based upon the different components of the proceeds.  There is no tax due on any  portion of the settlement due to pain and suffering, incidentals, or medical expenses.  However, the portion of a settlement which represents lost wages is taxable.

After a trial, there is a written decision which will tell you what portion is attributable to lost wages.

However, that is not generally the case after a settlement out of court.  Most of the time, a General Release does not state what portion of the settlement represents lost wages.  It may be that the IRS can make a determination as to the amount of taxes owed from the settlement.  Talk this issue over with your attorney.

Prepared by Anthony LoBiondo

Call for a free consultation at (845) 569-7600

No comments:

Post a Comment