2006-10-03 03:58:12 · 11 answers · asked by Debra R 1 in Business & Finance ➔ Taxes ➔ United States
After looking the the IRS website it seems that any amount covering your loss is not taxable but any punitive amount is. It is confusing and if it is a large amount I would consult a tax profesional rather than trust someone at this site.
2006-10-03 04:13:34 · answer #1 · answered by Barkley Hound 7 · 1⤊ 0⤋
For the most part the others who answered your question are correct. EXCEPT, based upon the following information, the tax-ability of settlements may change dramatically:
In a bombshell opinion, Murphy v. IRS, (a suit involving whether damages received for emotional distress was income for tax purposes), a three-judge panel of the D.C. Circuit Court of Appeals concluded that that tax-code section 104(a)(2) -- which permits a tax exclusion for physical personal injuries only -- is unconstitutional under the 16th Amendment. The court used an "original intent" analysis, championed by conservative Supreme Court
Justice Antonon Scailia, to conclude that the drafters of the 16th Amendment
did not consider emotional distress damages as taxable income.
By the way, Jeff, it's nice that you are a CPA but don't you think that you should add to your answer that any amount that you have recovered of you loss is not taxable "to the extent that the amount was not previously deducted on a tax return"? Such as medical expenses you have deducted on your prior year's Schedule A.
2006-10-04 07:20:09 · answer #2 · answered by Great Tax Info 2 · 0⤊ 1⤋
It depends on the type of income it is classified as. Not all income received through legal settlements are income for tax purposes. You need to check with the attorney to see if this is income that is includable as income. If not, they should tell you why.
2006-10-03 04:02:14 · answer #3 · answered by fijisun 2 · 0⤊ 0⤋
I heard in the past settlement is not taxable just like life insurance. But again, it could depends on the amount and the nature of the settlement. I suggest consulting an attorney unless it's only a few hundred dollars.
2006-10-03 04:02:01 · answer #4 · answered by spot 5 · 0⤊ 1⤋
It depends on the type of class action. If stock market related it is a long term gain or cost basis decrease if you still own the stock. If for class action not related to lost income or gains then it is nontaxable. You did not say what kind of class action.
2006-10-03 04:46:45 · answer #5 · answered by spicertax 5 · 0⤊ 0⤋
Denmarks is correct. Only the punitive portion of the settlement is taxable. Any portion of the settlement which covers actual losses you sustained is not taxable.
2006-10-03 04:52:14 · answer #6 · answered by Jeff C 2 · 0⤊ 1⤋
I filed a million/25/2013 and change into common a million/27/2013, with training credit and It says on the WMR web site that I have a right away deposit date of two/26/2013. i desire this enables. i imagine you should get your date kbefore March 1st.
2016-10-16 03:18:10 · answer #7 · answered by ? 4 · 0⤊ 0⤋
Unfortunately, yes. However, if you had an attorney representing you, the attorney can be paid their portion instead of you having to get taxed on the entire amount.
2006-10-03 04:00:42 · answer #8 · answered by Lioness 5 · 0⤊ 1⤋
ABSOLUTELY ! however it is NOT "earned" income so be sure to go to an accountant this year and he him/her do it right !
Remember it is a good thing to pay someone smarter than you to work things for you!
Happy tuesday !
: )
2006-10-03 04:05:16 · answer #9 · answered by Kitty 6 · 0⤊ 1⤋
Yes, because it is income
2006-10-03 03:59:52 · answer #10 · answered by BiancaVee 5 · 0⤊ 1⤋