Many people have a lot of doubts when it comes to the amount received after winning personal injury lawsuits. Usually, the amount received to compensate your lost income or wages is taxable. The amount received for emotional distress is not taxable. Compensatory damages for physical sickness or injury are not included as income. When you have filed a personal injury claim, your personal injury lawyer should be able to give a clear idea about all these matters. Most of the personal injury attorneys will tell you how to proceed with a case so that you can be benefitted.
If you receive money for psychological damages, the money is taxable. At the same time, money received for punitive damages is taxable. An amendment was made in 1996 that made the punitive charges taxable without having any connection to physical or nonphysical injuries.
Sometimes you may receive a huge amount as a part of the settlement. Even if it belongs to nontaxable amount, the interest received after depositing it in a bank, is taxable. When the amount is awarded, the verdict clearly states the amount of money paid for the medical bills, property damage, pain, lost wages and suffering. The money you received as a part of your personal injury claim that is subject to taxation by the state tax or the IRS will be clearly mentioned by the jury verdict. If you have any doubt regarding this, you can clarify it with your personal injury lawyer attorney.
There may be a problem when the money paid for the settlement does not carry any specifications for what it is being paid for. The IRS will have to go through a lot of papers for determining it. It may examine a lot of papers including the legal complaint, the letter and other papers submitted for insurance etc. The problem can be easily solved when the wordings in the settlement release are used appropriately. The General Release form may not have these details. So it is better to check the customized form to get the details.
Choosing a personal injury lawyer attorney
When choosing a personal injury lawyer attorney, ensure that he is aware of all the details of the proceedings so that you will not have any problem later on. Ask a lot of questions, understand his experience and then decide whether you will be proceeding with him. If he is competeant enough, you will be albe to win the claim without any difficulty.