Plaintiffs understandably feel a lot of positive emotions once they receive their injury settlement amount. Since most personal injury cases are settled before trial, receiving the compensation amount is very fast and easy for plaintiffs. The insurance company or the defending attorney signs the payout release clause, resolving the case once and for all. The responsibility to manage this sum lies solely on the shoulders of the plaintiff. From income tax issues to lawyer fees – numerous complications arise after a personal injury claim is settled. What can plaintiffs do to protect their compensation? Here’s a guide by Personal Injury Attorney in National City.
No Need to Worry About Taxes
There’s no need for plaintiffs to worry about state or federal taxes on their compensation amount. It doesn’t matter if the plaintiff loses or wins the case – no government body can tax the proceeds from the verdict. However, there are a few taxation exceptions. For instance, if the defendant (a taxpayer) has to pay compensation out of their gross income, that amount may be taxable. Overall, these payouts are designed to compensate the victim. So, if the payout amount is used to cover lost income, medical fees, or other mental trauma damages, these amounts will still be non-taxable. The same applies to the fees of your Personal Injury Attorney in National City.
When Can You Be Taxed?
Your compensation amount will be taxed, if it is discovered that you’re at fault for breaching a contract. No matter how serious or long-term your injury is or how high your medical fees are, you’ll be taxed for breaching a contract that caused the lawsuit. For instance, if you have a forced arbitration agreement with your employers and breach that argument to file a lawsuit, any winnings from that claim will be taxed. That’s why a top Accident Lawyer in National City always recommends that his clients not sign forced arbitration agreements with employers.
Punitive Damages
If you file for punitive damages, expect your payout amount to be heavily taxed. Punitive damages are payments the plaintiff receives as a form of punishment for the defendant. For instance, an uninsured driver will be forced to pay punitive damages out of their pocket. Usually, such defendants have little or no personal wealth, so the overall transaction isn’t as beneficial for them. On your behalf, your Accident Lawyer in National City will request the judge to pass separate judgments on compensatory and punitive damages. By doing so, you won’t have to pay taxes on your compensatory damages.
Making Sure Your Compensation is Non-Taxable
In some cases, two cases are fought against the defendant simultaneously. One’s a personal injury case, and the other one’s not. In such a situation, if the damages from the personal injury claim supersede the other claim, you’ll have to discuss with the court to clarify the compensation amount you’re receiving. Be clear on the damages coming from the injury lawsuit and the damages that are coming from the other lawsuit. Confusing the two can result in excess taxation. For more information visit here: Braff Personal Injury Law Firm
