rownwp[at]longwood.edu wrote:

- quote -

If I could hop on this thread here... what sort of
settlements are taxable these days ?

You used the word "punitive" - which I would take from a
legal perspective to be strictly awarded as a deterrent to
persuade the defendant that they want to avoid doing
whatever they did before. It makes reasonable sense that
this might be taxable since it is not being paid to the
plaintiff for "damages" incurred.

But, what about payments (settlements) made for "pain and
suffering". These are "damages" in that they are intended to
compensate the plaintiff for damages incurred - but are not
compensation for direct costs (e.g. medical expenses). Are
these taxable? Are there certain rules/decisions to be
adhered to in the settlement to insure non-tax- ability ?

Thanks,

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Avrum Lapin wrote:

- quote -

Since there is nothing for punitive damages it appears the
entire settlement amount will be excluded from taxation.

The daugher has two choices - provide the W-9 or fight it
out and delay getting the money.

Worse case scenario (based on your facts) if she provides
the W-9 -- she has to file a tax return to get a refund of
income taxes withheld. Good luck.

Regards,
Bill

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Avrum Lapin <avrum223nospam[at]nospamverizon.net> wrote:

- quote -

Aw, come on, Avrum/. We don't teach settlements in
TaxAide:^)

Sure, give the W-9 and if there's withholding, get it back
on filing. There should not be withholding however.

- quote -

If it's a large settlement, file, and attach a statement for
Line 21 showing zero income, explaining the settlement of
$xxx was for personal [physical injury and related medical
costs, and the taxable portion is zero. Get the return
filed to establish this fact.

- quote -

I don't think, with a W-9 in hand they would withhold.

- quote -

Not uncommon. She might want to speak with a lawyer about
whether to accept the settlement before she does anything
else.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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Tax-Aide client¹s adult daughter slips and falls, sues store
in pro-per, and accepts settlement equal to her medical
expenses. Noithing for pain and sufferring or punitive
damages. Insurer wants a W-9

Daughter on disability and income below filing threshold.

Daughter worried that insurer will withold at 28% and or
issue a 1099 or similar.

Is daughter's concern valid. If so how is this handled.

Note that entire settlement has been liened by medical
providers.

--
Avrum Lapin avrum113[at]earthlink.net
Upland CA Remove NOSPAM from address

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