Is Your Personal Injury Settlement Taxable or Tax-Exempt?
Settlements and jury verdict awards for emotional distress may be taxable. Lost income is taxable if the lawsuit is employment-related such as for unlawful discrimination or involuntary termination.
What’s in your release? If your personal injury release is silent on these issues, the IRS may make the decisions. Before taking your case to verdict, be aware that the jury will allocate your personal injury award for each type of damage, without consideration of income tax.
Tax Implications of Personal Injury Settlements
Will Your Personal Injury Insurance Settlement Be Taxed by the IRS?
Will you have to pay income tax on your personal injury lawyer’s legal fee?
Litigating to avoid taxation of personal injury damages – the CPA Journal
Lawsuit awards and settlements audit guide – the CPA Journal
Lawsuits, Awards, and Settlements Audit Techniques Guide (IRS)
Avoiding Penalties When Reporting Damage Awards and Settlements – Four steps CPAs can take. This article cites Banks, II, 125 SCt 826 (2005) where the Supreme Court held that attorneys’ fees paid to an injured party’s attorney may also be reportable as taxable income to the injured party. But the article Misassigning Income: The Supreme Court and Attorneys’ Fees by Georgetown University Law Center seems to indicate that the problem was legislated away.
Contingent Fees and Tax Burdens: Planning After Commissioner v Banks
Contingent Attorneys’ Fees: The Income Tax Dilemma
Federal Income Tax and Personal Injury Settlements & Judgments – by Fred A. Simpson
Lawsuits, Awards, and Settlements Audit Techniques Guide – IRS audit guide.
Taxation of Contingent Fee Awards
Taxation of Contingent Legal Fees on Settlements or Awards
Contingent Fee Awards—A Different Approach
Taxing Punitive Damages for Physical Injury or Sickness
Taxation of Emotional Distress Damages
Tax Implications of Settlements and Judgments – Information at IRS.gov
Structured Settlements
Advantages and disadvantages of structured settlements
Advantages and disadvantages of annuities in structured settlements
Lawsuit Loans
Lawsuit loans are really not loans. That’s why the companies that “loan” money to plaintiffs in accident cases are able to charge such high rates of interest.
If it was a loan, the interest rate would be usurious (usury) which is illegal. What makes these “loans” legal is that they are an investment in your case.
This is called non-recourse funding. The company “loaning” you the money is investing in your case because if you lose your case, you don’t have to pay the money back. If it was a loan, you would have to pay the money back.
Use this lawsuit loan calculator to see what a lawsuit loan will cost you and to compare two different lawsuit loans.
Ethics Opinions Regarding Non-Recourse Funding – A list of opinions in most states concerning money provided to plaintiffs in personal injury cases.
Use this personal injury settlement calculator to see how much you should receive after legal fees from a personal injury settlement.