The people who are worried about whether a lawsuit settlement is taxable are those who have already won. With a lot of money that these individuals have, it should be noted that they are very happy. It is good to let individuals be aware that one may find himself giving some cash to the country after winning this award as tax. The government will want to get some amount out of the much you have as no trial will be involved in settling a civil court case. There is a need for individuals to be aware that when it comes to the lawsuit settlement, they are usually categorized into two types.
The first category of the lawsuit settlement will be known as a physical injury settlement. Individuals should be aware that the second category is the settlement that is as a result of a non-physical injury. If you come across the two, then bear in mind that they are the types of the lawsuit settlements.
Not only a broken bone will be considered as the physical injury, but also diseases such as cancer and flue. An example of a case that will be consider as being a non-physical injury is the defamation of character.Defamation of character is an example of a non-physical injury. With the defamation of character it is where the injury is as a result of emotional distress will is considered as being unquantifiable.
We have a kind of settlement that can either take the side of being physical or non-physical. They should, however, be informed that the kind can be tacked as being alone in most case. The type that we are talking about in this case is the punitive damages. With the punitive damages, it is the instances where the defendant pay more than that required by a rule from the judge.
The reason for such case is so that the defendant can be punished. Tax will be required if you are having an increase in your income as a result of amount paid. It should, however, be understood that with IRIS, they will have some exemptions if the claim is a physical injury settlement.
If the injury was physical, then an individual will not have to pay the tax. Replacement of the lost wages as well as emotional distress are instances where the cases can apply.
Examples of the mentioned cases will include defamation, slider as well as the damaging of property. Any the individual who emerges as a winner, in this case, will be required to pay the taxes. A lawyer may be of help to an individual who is not sure on whether the kind of lawsuit settlement will require an individual to pay the taxes for the amount of cash won by him.