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Posted by Stuart Bronstein on May 8, 2008, 11:03 am
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>>
>> Sorry but that's wrong. It's only taxable to the extent it's
>> income. If someone steals your money and you sue to get it back,
>> it's not income. It's just getting back what you lost. Even
>> though it's not for personal injuries.
>
> True. The original post says " to reimburse me for what I lost".
> If this is lost wages, then I imagine it is taxable. If it is a
> recovery of capital as in your stealing example, then it should
> not be taxable.
Exactly. The original post did not specify what the damages might
consiste of, so you're right from the standpoint that it could have
gone either way depending.
The rules concerning paying too much in taxes, as I recall, can not
always be easily figured out based on general rules. Courts sometimes
treat them differently based on public policy grounds. So to answer
the question authoritatively I suspect that more research will be
necessary.
Stu
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Posted by Mark Bole on May 7, 2008, 9:25 pm
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Stuart Bronstein wrote:
>>
>>> I am suing a professional for actual damages. When I win, will
>>> the proceeds be taxable, since they are just to reimburse me for
>>> what I lost? Are my legal fees tax deductable?
>> It is taxable. Only specific personal injury damages are
>> potentially tax-free.
>
> Sorry but that's wrong. It's only taxable to the extent it's income.
> If someone steals your money and you sue to get it back, it's not
> income. It's just getting back what you lost. Even though it's not
> for personal injuries.
As an additional factor, if you had previously taken a deduction for
theft loss, then you would have a taxable recovery. Also, the OP states
elsewhere that his "damage" was paying too much tax. If any of it was
deductible state taxes, then, again, the legal settlement would be
partly a taxable recovery.
-Mark Bole
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Mark Bole
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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
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<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
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<< Copyright (2007) - All rights reserved. >>
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Posted by Bill Brown on May 7, 2008, 12:27 am
Please log in for more thread options > I am suing a professional for actual damages. When I win, will the proceeds
> be taxable, since they are just to reimburse me for what I lost? Are my
> legal fees tax deductable?
>
> If it is more complicated than this, what are the issues involved?
It is more complicated. What is the nature of the damage you suffered?
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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
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Posted by Woody on May 7, 2008, 2:35 pm
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>> I am suing a professional for actual damages. When I win, will the
>> proceeds
>> be taxable, since they are just to reimburse me for what I lost? Are my
>> legal fees tax deductable?
>>
>> If it is more complicated than this, what are the issues involved?
>
> It is more complicated. What is the nature of the damage you suffered?
>
My accountant gave me advice which turned out to be seriously wrong,
resulting in much higher taxes. He had all the information needed to answer
correctly, but (apparently) chose to make incorrect assumptions rather than
looking at the information.
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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Mark Bole on May 7, 2008, 8:48 pm
Please log in for more thread options Woody wrote:
>>> I am suing a professional for actual damages. When I win, will the
>>> proceeds
>>> be taxable, since they are just to reimburse me for what I lost? Are my
>>> legal fees tax deductable?
>>>
>>> If it is more complicated than this, what are the issues involved?
>> It is more complicated. What is the nature of the damage you suffered?
>>
> My accountant gave me advice which turned out to be seriously wrong,
> resulting in much higher taxes. He had all the information needed to answer
> correctly, but (apparently) chose to make incorrect assumptions rather than
> looking at the information.
I found a good overview and discussion of some of the issues involved at
www.weitzlux.com/irs/lawsuitsettlements_915.html
(I have no connection to the publisher of this web site.)
All income from whatever source is taxable, unless specifically
excluded. Physical injury settlements are specifically excluded,
punitive damages normally are taxable.
Are you saying that your taxable income would have been the same,
regardless of whether you had received "correct" or incorrect advice?
In other words, the bad advice resulted only in higher taxes on the same
amount of income?
Taxation of lawsuit settlements has itself been taken to court on
numerous occasions. On top of that, they are often not reported, or
mis-reported, on Form 1099-MISC.
Good luck with trying to come out ahead on this!
-Mark Bole
--
Mark Bole
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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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