does the internal revenue service tax a settlement created by a personal injury suit?
if i won two million dollars in a personal injury suit. will the internal revenue service tax that money
- Bostonian In MOLv 71 decade agoFavorite Answer
Settlements for physical injury or illness are not taxable. However if any part is earmarked for lost wages, interest, or punitive damages those portions are fully taxable as ordinary income.
Some attorneys are not aware of the tax implications on settlements. If it's a settlement for physical injury or illness, have your attorney push for a flat settlement amount for the injury WITHOUT classifying any of it for lost wages, interest, punitive damages, etc. That way the entire amount will be tax free.
- kroeningLv 43 years ago
ok, i don't be attentive to who's been working this crud however the guy is to blame to pay taxes purely on income EARNED. as a result, till he SELLS the ball, there is not any TAXABLE income!!!!!!!!!!!!!!!!!!!!! give up listening to the jerks broadcasting the information, human beings! activity teach winnings are recorded below your social risk-free practices quantity and you're sent a W-2 at tax time. Even radio station prizes in way over $4 hundred, they require your social risk-free practices quantity and in small $ quantities your on the "honor" equipment and not sent a W-2 yet do not think of for a minute that the radio station hasn't suggested it. that's a company price that reduces their income tax.