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I won a small lawsuit in 2010. I received a check for $6000. Does anyone know how I go about claiming this on my taxes? Would this go under regular earnings?
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Brian -
Was the award for compensatory or punitive damaages?
From what I remember, legal awards given to restore a person (compensatory) are not included in income.
But punitive damages are.
From: Publication 525 (2009), Taxable and Nontaxable Income
Other compensation. Many other amounts you receive as compensation for sickness or injury are not taxable. These include the following amounts.
Compensatory damages you receive for physical injury or physical sickness, whether paid in a lump sum or in periodic payments. See Court awards and damages under Other Income, later.
Benefits you receive under an accident or health insurance policy on which either you paid the premiums or your employer paid the premiums but you had to include them in your income.
Disability benefits you receive for loss of income or earning capacity as a result of injuries under a no-fault car insurance policy.
Compensation you receive for permanent loss or loss of use of a part or function of your body, or for your permanent disfigurement. This compensation must be based only on the injury and not on the period of your absence from work. These benefits are not taxable even if your employer pays for the accident and health plan that provides these benefits.
Also:
From: Publication 525 (2009), Taxable and Nontaxable Income (see section Court Awards and Damages)
Court awards and damages. To determine if settlement amounts you receive by compromise or judgment must be included in your income, you must consider the item that the settlement replaces. The character of the income as ordinary income or capital gain depends on the nature of the underlying claim. Include the following as ordinary income.- Interest on any award.
- Compensation for lost wages or lost profits in most cases.
- Punitive damages, in most cases. It does not matter if they relate to a physical injury or physical sickness.
- Amounts received in settlement of pension rights (if you did not contribute to the plan).
- Damages for:
- Patent or copyright infringement,
- Breach of contract, or
- Interference with business operations.
- Patent or copyright infringement,
- Back pay and damages for emotional distress received to satisfy a claim under Title VII of the Civil Rights Act of 1964.
- Attorney fees and costs (including contingent fees) where the underlying recovery is included in gross income.
Do not include in your income compensatory damages for personal physical injury or physical sickness (whether received in a lump sum or installments).
Emotional distress. Emotional distress itself is not a physical injury or physical sickness, but damages you receive for emotional distress due to a physical injury or sickness are treated as received for the physical injury or sickness. Do not include them in your income.
If the emotional distress is due to a personal injury that is not due to a physical injury or sickness (for example, unlawful discrimination or injury to reputation), you must include the damages in your income, except for any damages you receive for medical care due to that emotional distress. Emotional distress includes physical symptoms that result from emotional distress, such as headaches, insomnia, and stomach disorders.
Deduction for costs involved in unlawful discrimination suits. You may be able to deduct attorney fees and court costs paid to recover a judgment or settlement for a claim of unlawful discrimination under various provisions of federal, state, and local law listed in Internal Revenue Code section 62(e), a claim against the United States government, or a claim under section 1862(b)(3)(A) of the Social Security Act. You can claim this deduction as an adjustment to income on Form 1040, line 36. The following rules apply.
The attorney fees and court costs may be paid by you or on your behalf in connection with the claim for unlawful discrimination, the claim against the United States government, or the claim under section 1862(b)(3)(A) of the Social Security Act.
The deduction you are claiming cannot be more than the amount of the judgment or settlement you are including in income for the tax year.
The judgment or settlement to which your attorney fees and court costs apply must occur after October 22, 2004.
Pre-existing agreement. If you receive damages under a written binding agreement, court decree, or mediation award that was in effect (or issued on or before) September 13, 1995, do not include in income any of those damages received on account of personal injuries or sickness.Last edited by jpg7n16; 01-05-2011, 08:43 AM. - Interest on any award.
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I won a Lemon Law case against Ford Motor Company. The repairs that I had done over the course of the year never cost me any money. The vehicle was under warranty. My attorney got Ford to compensate me this amount more for "my time and inconvenience." as he put it.Originally posted by jpg7n16 View PostBrianComment
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You should likely include it in your income then.
I did a lot of editing
So see the section in blue above...Comment
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Hmmm. No emotional distress suffered. More of an annoyance than anything. Anyway, thanks for your help. I was thinking that I would have to include this in my income.BrianComment
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If you do not include it (in income) and it was reported to IRS, "not a big deal"- as within 6-9 months you will get a letter reminding you of the extra income, and the IRS will calculate the new tax for you.
I had this problem one year when I moved and my employer switched (we were sold off), so the company of record did not know where to send my 1099 and I "forgot" to include the $6000 of stock sales on my return.Comment
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This year, you could probably tack another 3 months or so onto that time frame.Originally posted by jIM_Ohio View PostComment
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Jesus, what is it with your noobs?Originally posted by israelgentryComment
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