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I just recently received a settlement of $173,000. How much

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of that will be taxed...
I just recently received a settlement of $173,000. How much of that will be taxed if I live in the state of NY?
Submitted: 2 years ago.Category: Tax
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6/3/2015
Tax Professional: Tax.appeal.168, Tax Accountant replied 2 years ago
Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 4,021
Experience: 3+ decades of varied tax industry exp. Tax Biz owner
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Welcome. Thank you for choosing us to assist you. My name is ***** ***** my goal is to help make your life, a little... less taxing.
In brief, some settlements are taxable and some are not. In order to best assist you, please answer the following questions.
1) What type of settlement is it?
2) What did you receive it for?
3) What is your normal tax bracket? If you don't know the bracket, how much is your annual income outside of the settlement?
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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 years ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 13,252
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Sorry - even though I had this locked the entire time... someone was able to post before me...
I'll opt out now.
You are in good hands
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Tax Professional: Tax.appeal.168, Tax Accountant replied 2 years ago
Hello again,
I'm not sure if you have responded or not. The system is prompting me that a response is required from me, but I don't see a response from you. If you have responded, please resend because I don't see it on my end.
Thanks
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Customer reply replied 2 years ago
Chase Bank made a settlement with service members whose houses were foreclosed inappropriately. I received a letter stating that taxes will be deducted on the settlement, but not sure how much. I've always been in the 10-15% tax bracket. Just wondering if I should wait until the IRS get their money before I start investing. I'm thinking of starting my own company.
Tax Professional: Tax.appeal.168, Tax Accountant replied 2 years ago
Hello again,
Thank you for the explanation. The tax consequences of payments received under the National Mortgage settlement (NMS) depend on the unique facts and circumstances of each individual borrower. You can review the Ruling at the following link;
http://www.irs.gov/pub/irs-drop/rr-14-02.pdf
Based on the following information, the lump sum payment has to be included in gross income. SEE BELOW:
The following information is based on general guidance from the IRS regarding compensation for SCRA foreclosure violations. This information will also be provided on the check stubs attached to the payments. Note that these payments may include one or more of the following components: a lump sum payment, lost equity, and interest on lost equity.
Lump Sum Portion of Settlement Payment. Generally, you must include the lump sum payment in gross income. In limited circumstances, however, you may be able to exclude part or all of the lump sum payment from gross income. For example, you may qualify to exclude part or all of the payment from gross income if you can show that the servicer made the payment to reimburse specific nondeductible expenses (such as living expenses) that you incurred because of the SCRA violation. It is likely that you must include most or all of the lump sum payment in your income.
Lost Equity Portion of Settlement Payment. If you lost your main home in foreclosure, you should treat the lost equity payment as an additional amount you received on the foreclosure of the home. You will have a gain on the foreclosure only if the sum of the lost equity payment and the value of the main home at foreclosure is more than what you paid for the home. In many cases, this gain may be excluded from income.
REFERENCE SOURCE:
http://www.nationalmortgagesettlement.com/taxinfo
While there is no way to know how much they plan to withhold in taxes from the settlement, my guess would be 28% because that is the tax bracket that amount falls under.
Let me know if you require further assistance with this matter.
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Tax.appeal.168, Tax Accountant
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