If you have a personal injury case, it is important to obtain the services of a tax attorney in addition to your personal injury attorney. A tax attorney will assist your personal injury attorney in crafting a complaint and/or settlement to your tax advantage. For instance, allowing you to deduct the costs of suit from any recovery, tax treatments of interest and punitive damages, distinction between injury awards versus other awards, etc. In addition, a tax attorney’s help during the case may increase the speed of settlement because discussing its tax implications may help bring the parties and their positions closer together, especially if the payor and payee both benefit from tax savings.
Assistance During Settlement
The tax implications of a particular financial transaction may be the major factor both sides consider. While personal injury cases are not generally categorized as financial transactions, the settlements of such cases have major financial, and therefore, tax implications that both parties should consider. The knowledge and discussion of tax implications can help both parties to realize their individual consequences and desired results more quickly. A tax attorney can help make decisions regarding any negotiation of your settlement for optimal financial gain. Also, having a tax attorney on your side may help you get the characterization of damages you desire for tax purposes after the settlement.
Assistance After Settlement
A tax attorney may also help with tax issues in crafting the Final Settlement Agreement. The type of settlement received may determine the taxability of any monetary gain. For example, a settlement for a physical injury or physical sickness is generally non-taxable. Although, if an itemized deduction for medical expenses related to the injury or sickness was deducted in previous years then that part may be considered for tax purposes. Settlements in other areas, including but not limited to interest, punitive damages, mental anguish, emotional distress, employment discrimination, injury to reputation, loss-of-use of property, and loss-in-value of property may have different tax treatments. Further, as a general rule, it is also important to remember that estimated tax payments may be required for federal and/or state taxes.
We work extensively with personal injury attorneys in cases such as those discussed above. If you are looking for a personal injury attorney, we can refer you to an experienced and knowledge one that will fit your needs. And if you are looking for sage advice about how to best craft your settlement, we want to help.
We invite you and your attorney to contact our tax law firm to discuss your legal questions. Please feel free to use our contact form or phone us at (415) 394-7200.