Why if I'm under the age of 18 and I had a car accident and I got a settlement over it i cant get my money until i'm 18 but if I need money before I turn 18 me and my mom have to go to court for my money and then the judge has to say it is okay.. I have no problem with it being in an account (like they are doing till im 18) but why is it if I put it in a savings account to where it can draw interest we have to pay taxes on that @ the end of the year.. We've never had to do that with all our other savings account so why should we have to on this one?
2007-05-09 08:03:36 · 7 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
You aren't paying taxes on the interest from other savings accounts? You should be! Although maybe before you got this settlement, your total interest was below the income limit where you had to file, and now you're over it. If you have to file because of the settlement account, then you also have to list and pay tax on interest from any other savings account.
2007-05-09 08:37:49 · answer #1 · answered by Judy 7 · 3⤊ 1⤋
First, depending on what the settlement is for, the settlement itself may or may not be taxable. Age is not a factor in any case. Any interest earned on any account is taxable. As others have said, the amount of interest may not have been enough to require actually filing and paying before. Without knowing the amount of the settlement, the interest on it may or may not be enough to require a tax return either. You should consult a professional that can actually look at your entire situation and give you a complete answer.
For those how said only interest over $10.00 is taxed: Interest over $10.00 must be reported by the payer on a 1099-INT. If your total income is enough to require filing a return, even $0.01 must be included with or without a 1099.
2007-05-09 11:58:32 · answer #2 · answered by STEVEN F 7 · 2⤊ 1⤋
1st of all.. you only pay taxes on interest over $10.00 with the crap savings rates out there, you probably never earned enough to have to pay taxes before. Now you make a lot more interest so you have to pay. It should only be a small % of what you make in interest.
Next the money is put aside until you are 18 so that your family(ie mother and father) can't take it from you. Also you should really use that money when you are more mature and have a good use for it other than going to the mall or buying a car you don't need. you should touch that money unless you need it to pay for medical bills from your accident. Your not legally allowed to be on an account that you can own and operate like a checking account until your 18. It's safe thise way.
2007-05-09 08:15:43 · answer #3 · answered by Anonymous · 2⤊ 3⤋
maximum maximum probably no: Any funds interior the charge it truly is attributed to damage on your vehicle or diverse individual resources isn't considered sales from the IRS. The equivalent is nice for repayment for medical expenses, or damages concerning suffering and discomfort (phase 104 of the federal tax code). it truly is considered pass back of capital that brings you to some extent before on your twist of destiny. although, if there will be any element of your charge it truly is considered punitive damages, or repayment for lost sales, then that aspect is taxable. Punitive damages are those now no longer concerning any loss or damage, although although meant to "punish" the different social accumulating. those might want to were stipulated interior the charge. considering the fact that it is a charge, and a rather small one, this is quite not likely that any of the charge is considered punitive damages, inspite of the actuality that there will be continually a chance you've been reimbursed for lost sales, so ensure that out. yet really your settlment isn't taxable, inspite of the actual shown actuality that it should be reported on your tax pass back (ask your accountant).
2016-10-18 06:43:33 · answer #4 · answered by ? 4 · 0⤊ 0⤋
If the settlement is awarded to you and available only when you turn 18, you will not owe any tax because you do not have access to the money.
When you get the money, if it earns interest, that interest will be taxable income. It may be that in the past, interest that you or your mother earned was not taxed because you did not owe income taxes at all. However, at some income level, it will be taxed.
If you take money before you turn 18, and you earn over $850 of interest, then you are going to owe taxes (I assume you have no other income).
So, if you are going to take some of the money now, take an amount that will either not be invested, or will earn less than $850 in interest per year. That way you will owe no tax.
2007-05-09 09:09:29 · answer #5 · answered by ninasgramma 7 · 1⤊ 4⤋
I'm assuming you mean you have to pay taxes on the interest earned on the money not the settlement money right? You do not pay taxes on settlements that result from an injury. You pay taxes on interest earned on the money in the savings account ($10.00 or more). Why do you have to do it? Because our government is a bunch of greedy low lives.... I have never reported any interest earned unless it was $100.00 or more. Anything less than that the IRS doesn't bother you.
2007-05-09 08:10:55 · answer #6 · answered by Anonymous · 0⤊ 4⤋
There are so many problems with your question that a professional can't answer it. You should talk to a certified public accountant.
2007-05-09 09:45:34 · answer #7 · answered by cr125dr650 1 · 0⤊ 0⤋