If you have recently been involved in a car accident and had to seek personal injury settlements, there is a high chance that your next concern is on the legal obligation you have as a citizen and that is paying taxes. The truth is there is never a way to avoid fulfilling this obligation as one way or the other, the government always catches up with you. As such, after going through the challenging period when you had to stand up for your rights after getting involved in an accident, it is a question that has to be tackled.
For many people, the idea of auto accident taxes often pops up as the tax season approaches as that is when everyone is running around to beat the clock and file all returns. At such moments, you cannot help it but think about the settlements that have received, or you are about to receive for a settlement that is in the final stages. One thing that is crucial to know about car accident settlements is that the compensation is not only for pain and suffering, which is primarily what many people think about and wonder why they should pay any taxes on such. To ease your mind, the Internal Revenue Service (IRS) does not generally require you to pay taxes for pain and suffering.
However, it is vital to be aware that tax laws are not as simple as one might expect them to be, and there are lots of factors taken to account when it comes to auto accident taxes. This is enhanced by the fact that there are other compensations apart from pain and suffering as well as medical care. Other categories often taken to account in a settlement are property damage, lost income, emotional distress, and punitive damages. All these introduce new aspects which cannot be ignored because there is the general acceptance that no taxes should be paid for pain and suffering.
For individuals who receive large settlements, there is also the concern of the interest the amount earns when deposited in a bank. While in general, these interest rates are not high, there are tax acts that make it mandatory to report all interests earned when filing returns. As such, you cannot fail to factor in how this can have an impact on your taxable income. All in all, there are many other areas that come to play whenever there are discussions about auto accidents and payment of taxes that have to be properly addressed.
Essentially, this point to the fact that concerns on accident settlements taxable must be handled with a lot of care and are best handled with professionals. It is vital to seek legal guidance from a tax attorney who will look at the facts at hand before providing a solution that has a legal basis. The world on tax laws is complicated and is never one that you should try to maneuver alone as it can result in lots of problems with the state. Many at times, the personal injury lawyer will provide you with a trusted referral who will answer all address all concerns.