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  1. #1
    somewherenwsttx is offline Junior Member
    Join Date
    Nov 2004
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    personal injury settlement

    Texas, I receieved a personal injury settlement in 2001. My attorney told me I did not have to claim income for personal injury, and he has now provided the IRS with a sworn affidavit stating he told me I did not have to claim it.

    I am in the Due Process Hearing stage and scheduled for a phone hearing on December 2, 2004. What should I do. I am financially unable to obtain legal counsel.
  2. #2
    abezon is offline Senior Member
    Join Date
    Aug 2002
    Location
    Washington
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    3,484
    The attorney's sworn statement is great evidence if you lose and want to ask the IRS to forgive any penalties. A better solution is to win the IRS hearing and have the IRS agree the money is not taxable in the first place.

    Do a search on taxable settlements. Basically, a settlement that replaces taxable income (lost wages, employment discrimination suit) is taxable. A settlement that compensates you for physical injury is not taxable. You need to prove that you were physically injured & that the settlement was for the injury & pain & suffering, not for lost wages. The problem with this is that you probably sued for lost wages as well as injuries, & the settlement did not specify how much money if any was for lost wages. Get a statement from your attorney that your settlement was for the physical injuries, medical costs past & future, & pain & suffering, not for lost wages. This is what worker's comp cases are settled for, and they are not taxable even when the settlement amount is based partly on lost earning capacity.

    Good luck.
    This post does not constitute legal advice, nor does it create an attorney-client relationship. Postings are based only on the information provided and you should consult an attorney in your area before relying on information contained in this post.

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