@streetwolf wrote:
I received my settlement papers for my lawsuit as well as an initial check for $10,400. About $21,000 is being held as a medial lien until it is determined if anyone else is entitled to a piece my settlement award. This part of the process is being handled by a company called Archer Systems whom I understand is on my side and will do it's best to get as much of the lien back to me.
The settlement papers do not mention anything regarding any tax liability I might have. All it says is to contact a tax professional. I don't see the settlement papers helping a tax specialist at all. Am I missing something on my settlement paper that would indicate if the award is taxable or not? Could the medical lien be an indication that the award is non-taxable?
The settlement award as previously mentioned is for a physical sickness; cancer. According to the representative of the law firm physical sickness rewards are non-taxable. As far as I can tell from several IRS publications I only have to include as income any medical deductions I took for the treatment of my cancer pro-rated from the beginning of it. I have never taken any deductibles as I never met the 7.5% requirement for health deductions.
I asked my law firm rep if I would be receiving any forms like a 1099 and he said probably not. Can this be true? If I get no forms I suppose I just don't enter my award on my tax form?
As it stands for now I will assume my award is not reportable as income. Any more advice would be appreciated.
As said before, money award for physical injury is non-taxable, regardless of whether you get a 1099. (If you do get a 1099, there is a way to report it without paying tax, so the IRS computers don't send you a letter asking for an additional tax payment.) If the award contains interest or punitive damages, that portion would be taxable, and that would have to be disclosed somewhere in your lawsuit papers.
