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TJ, Esq.
TJ, Esq., Attorney
Category: Legal
Satisfied Customers: 9679
Experience:  Licensed to Practice Law
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Dear sir or maam, I am a Monroe County, NY, resident and

Resolved Question:

Dear sir or ma'am,
I am a Monroe County, NY, resident and was injured at work on 18 May 2009. I had surgery performed on my left shoulder on, or about, August 2009, as a result of that injury. I collected workman's compensation from that date till 23 November 2009, after completing several months of physical therapy and several follow up visits with my surgeon. I was then, medically, cleared to return to work, and received all weekly payments, for that time.
On 27 August 2010, I received a phone call from my, workman's comp insurance carrier, case manager, also based in NY state, at which time I was offered a $20,000 settlement.
My question is;
Is this $20,000 proposed settlement subject to local, NY state, and federal taxes? I was under the impression, that because this settlement did not include any wages, (lost, backdated, or other), that the settlement was tax free.
Is this accurate?
Submitted: 3 years ago.
Category: Legal
Expert:  TJ, Esq. replied 3 years ago.
Chat Conversation Started
TJG, Esq. :

Hello and thank you for allowing me the opportunity to assist you. Yes, personal injury settlements are generally tax free. They are considered compensation for the injury and not income.

Expert:  TJ, Esq. replied 3 years ago.
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Customer: replied 3 years ago.
You stated that, "generally they are tax free", how do I find out if my settlement will or wont be?
Expert:  TJ, Esq. replied 3 years ago.
Hi again. You may want to read the following website, as it provides the general rules used to determine whether your award is taxable:

http://articles.moneycentral.msn.com/Taxes/AvoidAnAudit/WinInCourtWithoutLosingToTheIRS.aspx

Specifically, you should note the following:

For a verdict or settlement to be tax-free, it must be structured to meet two new code requirements:

  • A physical injury or illness must have occurred. Without either, the proceeds will clearly be taxable.
  • The injury or illness must be the result of a tort -- a wrongful act, injury or action. If you successfully sue someone who hit your car, the award will be tax-free. But if you win a back-pay judgment from a breach of contract suit, the award is taxable income. It resulted from a contract dispute.

If the information that I provided was helpful, please remember to ACCEPT my post as that is the only way I will receive credit and compensation for my answer. Thank you and good luck!

DISCLAIMER: Please understand that the complexities of most legal problems cannot be sufficiently addressed in this setting. Accordingly, my post is intended as general information only, and should neither be construed as specific legal advice, nor as an adequate substitute for the retention of legal counsel.

TJ, Esq., Attorney
Category: Legal
Satisfied Customers: 9679
Experience: Licensed to Practice Law
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