My mother received a law suit settlement back in 1999 for auto accident and now IRS is saying that she has to filed with 1040. I am not sure what do , I need help so I can help her.
2007-03-20 16:24:09 · 2 answers · asked by smartkw1 1 in Business & Finance ➔ Taxes ➔ United States
It depends on what the settlement amount was for. For instance, if it was compensatory damages for medical expenses or for personal physical injury then it would not be taxable. If it was compensation for lost wages or punitive damages it would be taxable.
She may be required to file a 1999 Federal tax return (1040).
http://www.irs.gov/publications/p525/ar02.html#d0e7770
Click on "other income" then look for "Court awards and damages"
2007-03-20 17:38:20 · answer #1 · answered by tma 6 · 0⤊ 0⤋
Settlements for physical injury or illness are not taxable. If any portion of the settlement is for lost wages, interest or punitive damages that portion of the settlement IS taxable.
She should have the settlement documents reviewed by a tax attorney to see if any portion of the settlement was taxable. If it was, she will need to file an amended return for the year which the settlement was paid (not when the accident happened) and pay any taxes, penalties and interest due.
2007-03-21 00:54:11 · answer #2 · answered by Bostonian In MO 7 · 0⤊ 0⤋