Hiring a Lawyer, Legal Fees, Loans To Clients, Tax on Settlements

Questions to ask when hiring a lawyer

Computation of Expenses in Contingent Fee Agreements – Note that lawyers in some states like NY, must deduct expenses from the gross settlement and compute the fee percentage from the net settlement amount.

Is your settlement taxable or tax exempt?  What’s in your release?  Settlements and jury verdict awards for emotional distress may be taxable and lost income is taxable.  Does your release state that the settlement is only for physical personal injuries and non-economic losses?  If your 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 award for each type of damage, without consideration of taxes.

Advantages and disadvantages of structured settlements

Advantages and disadvantages of annuities in structured settlements

Litigating to avoid taxation of personal injury damages – the CPA Journal

Lawsuit awards and settlements audit guide – the CPA Journa

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

Should Personal Injury Awards be Taxed? – a student paper.

Lawsuit Loans

Lawsuit loans are really not loans. That’s why the companies which “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, if you don’t have to pay the money back. If it was a loan, you would have to pay the money back.

Ethics Opinions Regarding Non-Recourse Funding – A list of opinions in most states concerning money provided to plaintiffs in personal injury cases.