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Help! I and my two children received a court settlement for

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Help! I and my...
Help! I and my two children received a court settlement for the death of my husband and their father, in the state of Iowa, will we owe taxes on this settlement. No one ever said anything about this. If so, at what rate will we owe? 33% of the settlement went to the lawyer.
Submitted: 4 years ago.Category: Tax
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1/21/2013
Tax Professional: Megan C, Certified Public Accountant (CPA) replied 4 years ago
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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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.

Thank you for your question. I'm sorry about your loss. In order to better assist you, we need to know what type of settlement you received.

Also, your tax rate depends on how much money you make. If the settlement is taxable, it will be at ordinary rates which increase along with your income.
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Customer reply replied 4 years ago


My daughters each received $100,000. $66,667 after attorney fees. I received $125,000. $83,333 after fees. And my husband's estate received $387,418, $205,060 after fees.

Tax Professional: Megan C, Certified Public Accountant (CPA) replied 4 years ago
Thank you for your follow up, and the additional information.

I need to know what type of settlement you received. Was it wrongful death? Were the damages punitive or compensatory?

Also, I would need to know your entire income for the year in order to tell you the correct rates.

Thanks
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Customer reply replied 4 years ago

Can you just tell me if we will be taxed on this as income?

Tax Professional: Megan C, Certified Public Accountant (CPA) replied 4 years ago
Thank you for your follow up.

There are certain types of settlements that are taxable, and certain types of settlements that are not taxable. It's not as simple as letting you know if you will be taxed. It's a very complex area of the tax code. If you're not certain what type of settlement you received, contact your lawyer in the morning then come back here and let us know.

More information about settlements is available, HERE.

Once we receive more details on your settlement, then we can deliver your answer. Thanks again.
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Tax Professional: Megan C, Certified Public Accountant (CPA) replied 4 years ago
Thanks for allowing me the opportunity to help you. Please let me know if I can be of any further assistance to you in this matter. Also if you ever need anything else in the future please Simply enter "MyVirtualCPA" in the subject of your question Thanks again for being a JustAnswer customer
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