Here you are driving down the street in your new family station wagon with your windows down and the radio playing. You are just enjoying life to the fullest. Then, all of a sudden, that lady who was talking on her cell phone failed to see your turn signal and smashed into the back of your new car. The airbags deploy and burn your face and chest. You have just become involved in an auto accident. You shake it off and try to decide if it is shock that is making you hurt or if you are really in physical pain. Yes, you have just been in a car accident. This happens, roughly, every 12 seconds in the United States.
You think quickly and call upon an experienced car insurance settlement attorney before talking about the details with the auto insurance company. Smart move! A car insurance settlement attorney can provide you with the protection and information that you desperately need in such situations.
Here is a little more interesting information that might help you along the way!
The calendar is now quickly approaching the April 15th deadline and your friendly IRS would like no better then to put their hands in your pocket and remove some of your hard earned money. The problem that you are about to encounter is whether your car insurance settlement is considered a taxable income.
You must initially understand that car insurance settlement claims usually involve two diverse types of claims:
- The first one you have will deal with damages to one’s property
- The second car insurance settlement claim category is that which addresses the issue of personal injury.
To a specific extent your awarded funds are judged as compensation for your actual damages or losses which you received and as such they should not be construed as taxable income. According to IRS tax rulings, should any of your car insurance settlement be paid to either repair your damaged vehicle or as a reimbursement for your automobile insurance deductible, it should not be considered as a source of income. In simple words, the IRS looks at these unexpected funds as a simple return of your capital, which would restore you to the financial stance you were in prior to your involvement in the accident. Without any doubt then the personal injury amount of your car insurance settlement is not usually viewed as income by the federal tax offices. IRS code Section 104 specifically has excluded any damages received resulting from personal injury as a tax except income
However should you be granted a punitive sum then it may likely be vested as a taxable amount. It is likely that IRS would view damage awards as income. Keep clearly in mind that should you be awarded any of these punitive damages they could very well be considered a source of taxable revenue by the IRS. Their way of looking at this situation is that there must be relationship between your actual damage compensations as compared to your alleged pain and suffering as well as your lost wages. This particularly becomes a burden should you receive a lump sum car insurance settlement that is deemed to be taxable.
As always, the IRS tax code and its related laws should be completely reviewed and discussed with a professional tax preparer. Only in this way will you be certain of the most up to date and current information on your particular car insurance settlement issues.
Of course, the attorneys you find should always willing to answer any questions or concerns that you may have.