Facts On Whether Lawsuit Settlements Are Taxable.
If you are a winner in lawsuit settlement, then you are an individual who will be asking on whether it is taxable. Remember, if you are such an individual, you have with you a lot of cash, and you are happy about it. Paying tax to the government may be a result of an individual who wins the settlement case. With no cash being asked for a trial in the civil case, the government will want to get some share of the amount you get. There is a need for individuals to be aware that when it comes to the lawsuit settlement, they are usually categorized into two types.
The first category of the lawsuit settlement will be known as a physical injury settlement. The second category is that one which an individual will be awarded if the claim was an injury that was not physical. In case you encounter any the mentioned injuries, then bear in mind they are the categories of the lawsuit settlements.
With the IRS, it should be noted that the definition of a physical injury will not only be that of a broken bone but also cases of diseases such as cancer or even the flu. When we talk of a non-physical injury will be talking of cases such as defamation of character. We can define the defamation of character as an injury caused due to unquantifiable emotional distress.
It should be noted that individuals need to be aware that there is a certain kind that will be either physical or non-physical. They should, however, be informed that the kind can be tacked as being alone in most case. The type that we are talking about in this case is the punitive damages. With the punitive damages, it is a case where the defendant will find himself making payments which are more than what he is supposed to give as a result of the rule from the judge.
The reason for such case is so that the defendant can be punished. Tax will be required if you are having an increase in your income as a result of amount paid. In a case the damage is physical, then the tax will be excluded.
There will not be tax paid by an individual if the injury was a physical one. Examples of where such cases apply will be if there are lost wages that are being replaced or emotional distress.
Some of the instances where we can say that one has such settlements are defamation, slider, property damages among others. The taxes will be paid by an individual who will be regarded as a winner in this case. A lawyer may be of help to an individual who is not sure on whether the kind of lawsuit settlement will require an individual to pay the taxes for the amount of cash won by him.