Proceeds From Lawsuit Settlement

[suzanne rogalsky]

I am about to receive the proceeds from a lawsuit settlement - which will be fully taxable (punitive not personal injury). My questions are as follows:

1) how to receive the money (lump sum, 2 payments over 2 years...) in order to minimize tax
2)this was an empler/employee suit - so how to avoid it being classified as "lost wages"
3)how to file (ie - joint or married separate)
4) any other tax issues??

Thank you so much for any help you can give me!!

[terry1156]

I'm no expert in this area and getting someone who is good with taxes is probably advisable, but here is my take on your questions:


1. How you receive the money depends on your tax bracket. If taking payment over a few years will put your yearly income into a lower tax bracket, then that makes sense. If you are going to be in the same tax bracket no matter how you receive the money, then take it up front.

2. Since the money is going to be taxed either way, how it's classified shouldn't matter for tax purposes.

3. How you file again will depend how it will effect the brackets.

I'm sure I haven't been of much help, but those are some basics to think about.

[mom-from-missouri]

I would ask your lawyer. if you put it into an annunity, I don't think their are taxes--at least their did not used to be.