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Disability Insurance Lawsuit Settlement

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glenAndheim

Junior Member
What is the name of your state? Utah
I had disability insurance that was completely paid my employer.
I became permanently and totally disabled, and the insurance company paid for about 6 months. (A little more than a year after that I qualified for Social Security Disability.)
I sued the private insurance company and lost, then appealed, went into arbitration, and got a small lump-sum settlement, in return for leaving them alone and not telling anyone about the result of the arbitration.
Do I have to declare this on my income tax? I have not yet received a 1099 from them, or any other reporting form. If I do not receive a 1099, W-2 or anything else, do I owe income tax?What is the name of your state?
 


abezon

Senior Member
Ask your original attorney, or take the settlement document to your tax pro. How it was phrased will be significant. If the IRS views the settlement as being for lost wages, the money is taxable & has to be reported on a W-2. If the settlement was for breach of contract & intentional infliction of emotional distress, the money may not be taxable. W-2s are due out by 1/31. If you don't receive a W-2 by 2/15, you should contact the company & ask if one will be sent. If not, the company views the settlement as not wages. The company may be wrong, but this would be prima facie evidence that the money was not taxable.
 

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