2007-08-31 02:13:39 · 14 answers · asked by R G 1 in Business & Finance ➔ Taxes ➔ United States
The settlement is from an automobile accident (personal injury). Does this make a difference?
2007-08-31 02:39:47 · update #1
If I have to report it, do I only report the amount that I put in my pocket?
2007-08-31 02:44:44 · update #2
There is no clear yes or no answer here. Whether the settlement is taxable or not depends on the type of settlement it is.
If it is a settlement for physical injury for example, it is not taxable and would not appear on your tax return.
If it is an insurance settlement for a loss you had, some of it may be taxable, or it is also possible that none of it is taxable. For a casualty loss, you do need to report the insurance settlement along with the loss on your tax return.
If it is a settlement for a lawsuit not for physical injury, then it is possible that some of it is taxable.
Take the settlement papers to a tax preparer for review, or ask your attorney for advice or a referral.
Added after your comment: A personal injury settlement is exempt from taxes and is not reported on your tax return.
2007-08-31 02:30:22 · answer #1 · answered by ninasgramma 7 · 3⤊ 0⤋
Yes ordinarily it must be reported.
But you will need a tax expert to figure out HOW to report it. In many cases a settlement is can be considered ordinary income, but not always. This may be a problem because in the US taxes on income must be paid at the time the income is received. So you don't have much time to make the payment without technically incurring a penalty for failure to report.
Also, is the payment to be a lump sum or structured over a certain time period?
The rule of thumb in the US (and most other places) is if you've acquired anything of value, the government wants a slice of the pie.
2007-08-31 09:32:30 · answer #2 · answered by fredrick z 5 · 0⤊ 2⤋
bostonianinmo is 100% correct! It depends on what the settlement was for....if it is "pain and suffering" it is tax free. If it is for "economic" damages like lost wages etc it may be taxable.
2007-08-31 12:08:08 · answer #3 · answered by exirsman 5 · 0⤊ 0⤋
Wow, it is amazing the range of answers you received. What's more amazing is how many of them are wrong. This is a perfect example of why someone needs to see an accountant/CPA and the attorneys.
Bostonianinmo has provided with the clearest, concise answer. In addition, it is 100% correct.
For the complex issues, please cosult a CPA.
2007-08-31 11:28:48 · answer #4 · answered by NoNickname 2 · 0⤊ 0⤋
What a load of BAD information! Sheesh!
If it's for physical injury or illness it is NOT taxable.
If any portion was for lost wages, accrued interest, or punitive damages, those portions are fully taxable however.
2007-08-31 10:16:55 · answer #5 · answered by Bostonian In MO 7 · 3⤊ 0⤋
Settlements are usually reported for you so yes i would
2007-08-31 09:18:22 · answer #6 · answered by vmoore708 3 · 0⤊ 2⤋
yes, if not they will find out, and you will end up it being taken out of your taxes until it is paid. Trust me on this one. Pay it. That money goes in to the bank , your bank will report that money to the irs.
2007-08-31 09:22:49 · answer #7 · answered by krennao 7 · 0⤊ 2⤋
ninasgramma and bostonianinmo give correct answers. The people who just say "yes" are wrong.
2007-08-31 11:44:42 · answer #8 · answered by Judy 7 · 0⤊ 0⤋
Yes. If it was an insurance claim that information is giving to the IRS.
2007-08-31 09:21:11 · answer #9 · answered by Nicole S 2 · 0⤊ 2⤋
You have just reported it to the IRS...be sure to pay the taxes on it!
2007-08-31 09:17:30 · answer #10 · answered by ~ Floridian`` 7 · 0⤊ 2⤋