Guiding You Through The Legal Process
View Our Practice Areas

Personal injury compensation could be taxable income

Those who are hurt in Georgia or any other state who receive a settlement could be taxed on those proceeds. In fact, an individual could pay taxes on money that is eventually paid to his or her attorney. However, not everyone will have to give a portion of their injury settlement to the government. For instance, if the award is related to a physical injury, a plaintiff will generally get to keep all of it.

If emotional stress causes a physical injury, any award related to those injuries could be taxed. In some cases, the parties in a given matter can choose how to treat a settlement for tax purposes. While the IRS does not have to agree with how a settlement is broken down, it will generally defer to the terms of the agreement whenever possible.

Anyone who receives punitive damages as part of a financial award will have to pay taxes on that amount. The same is true of any interest that accrues either before or after a case goes to trial. Therefore, it may be a good idea to settle a case instead of taking it to court. Settling a case can also keep legal fees to a minimum. This is important as changes to the tax law mean that these fees cannot be deducted on a return.

Prior to taking legal action in a personal injury case, it may be a good idea to consult with a tax professional. This may make it easier to anticipate the tax consequences of a settlement or obtaining a favorable jury verdict. Those who fail to pay taxes on a financial award in an injury case might have assets seized or wages garnished. An attorney may work with the IRS to help resolve a tax dispute.

No Comments

Leave a comment
Comment Information
EMAIL US FOR A RESPONSE

Contact Us Today

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Office

100 Galleria Parkway SE
Suite #480
Atlanta, Georgia 30339

Toll Free: 800-765-2779
Phone: 404-841-6561
Map & Directions

600 University Park Place
Suite 100
Birmingham, AL 35209

Phone: 205-401-1229
Map & Directions