Have a Tax Question? Ask a Tax Expert
Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.
How are you today?
I'm sorry to hear about your safety deposit box.
To the extent that the proceeds are to reimburse you for property that you already had, that is not taxable
If any of the proceeds are punitive in nature then that is taxable
Is there anything else I can help you with?
thank you. I didn't report this amount received as I was told it was not taxable. I received a notice from the IRS stating this bank had reported this settlement as income received. The only thing I can think of is this bank sent in a 1099 (I rec'd nothing in the mail from this bank) instead of the proper form. Do you have this form #? Also, the IRS has stated I must send them $39,000 by 5/22/13. Is this true?
I can't speak about your personal situation, but if the lawsuit proceeds are to compensate you for property that you lost, it is not taxable.
The 1099 would be the proper form for them to send in.
What you need to do is go to a local tax preparer such as a CPA, attorney, or EA and have them look over your lawsuit documents and prepare an explanation to the IRS about why this money is not taxable.
Would you rate my service as excellent today?
I sent a copy of the lawsuit to the IRS as well as the distribution list. the settlement was for all the lost jewelry. I included a letter to the IRS concerning all the details. I thought a 1099 was used for "earned income". The settlement was not "earned income: there is another form of which I do not know the # XXXXX is used for settlement money received.
There is no form other than 1099 that the bank could use to report the income.
However, just because the IRS got a 1099 does not make it taxable
You would need a letter written by a tax professional outlining the reasons why this is not taxable income. SImply sending them a copy of the lawsuit would not be helpful, unfortunately. The IRS needs an explanation.
1099-MISC is used for a variety of purposes, not just earned income.
ok. however, I did send them a letter explaining in detail, the circumstance. This has turned into a nightmare for me. Thank you for your time.
You're welcome and I'm sorry that you are going through this. Unfortunately, you would have to speak IRS language to them. A professional can make much more progress with this issue, and given the $39,000 at stake I think it would be money well spent.
I'm sorry I can't personally help you write a letter, but we are prohibited from giving opinions and are limited to providing only general information on this site.
If satisfied with our communication, please rate my response as "excellent" so that I may receive credit for assisting you today.
I completely understand your position and yeas, I will rate you as excellent. Thanks again.
You're welcome. Have a great night and I wish you the best of luck. A professional will fight for you on this, and as I said it would be money well spent.
one last question, if that's ok? i don't have the $39,000 as most of my $ is tied up in secured deposits. is there any way i can pospone this demand for pmt?
Yes, you don't have to pay while this is in dispute
penalties and interest will continue to accrue, but if it's found it's not taxable everything - including penalties and interest would go away.
And if it is, worst case scenario, found that you did owe the tax, you could spread the payments over 72 months
so, i should send back the notice and mark "i do not agree with the ird decision?
Yes you can do that
And call the 1-800 number on the notice and ask for an extension because you are getting a tax professional to look over everything
thank you again!!
Have a great night