Comments on: I have received a settlement from a class action lawsuit. Do I have to claim this as income on Fed Tax return? http://netclubusa.net/federal-tax-return/i-have-received-a-settlement-from-a-class-action-lawsuit-do-i-have-to-claim-this-as-income-on-fed-tax-return/ Be smart, do your taxes on time! Fri, 06 Jul 2012 04:39:35 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: hoodoodrink http://netclubusa.net/federal-tax-return/i-have-received-a-settlement-from-a-class-action-lawsuit-do-i-have-to-claim-this-as-income-on-fed-tax-return/comment-page-1/#comment-2438 hoodoodrink Mon, 28 Jun 2010 12:34:55 +0000 http://netclubusa.net/federal-tax-return/i-have-received-a-settlement-from-a-class-action-lawsuit-do-i-have-to-claim-this-as-income-on-fed-tax-return/#comment-2438 For the most part the others who answered your question are correct. EXCEPT, based upon the following information, the tax-ability of settlements may change dramatically: In a bombshell opinion, Murphy v. IRS, (a suit involving whether damages received for emotional distress was income for tax purposes), a three-judge panel of the D.C. Circuit Court of Appeals concluded that that tax-code section 104(a)(2) -- which permits a tax exclusion for physical personal injuries only -- is unconstitutional under the 16th Amendment. The court used an "original intent" analysis, championed by conservative Supreme Court Justice Antonon Scailia, to conclude that the drafters of the 16th Amendment did not consider emotional distress damages as taxable income. By the way, Jeff, it's nice that you are a CPA but don't you think that you should add to your answer that any amount that you have recovered of you loss is not taxable "to the extent that the amount was not previously deducted on a tax return"? Such as medical expenses you have deducted on your prior year's Schedule A. I'm a CPA For the most part the others who answered your question are correct. EXCEPT, based upon the following information, the tax-ability of settlements may change dramatically:

In a bombshell opinion, Murphy v. IRS, (a suit involving whether damages received for emotional distress was income for tax purposes), a three-judge panel of the D.C. Circuit Court of Appeals concluded that that tax-code section 104(a)(2) — which permits a tax exclusion for physical personal injuries only — is unconstitutional under the 16th Amendment. The court used an “original intent” analysis, championed by conservative Supreme Court

Justice Antonon Scailia, to conclude that the drafters of the 16th Amendment

did not consider emotional distress damages as taxable income.

By the way, Jeff, it’s nice that you are a CPA but don’t you think that you should add to your answer that any amount that you have recovered of you loss is not taxable “to the extent that the amount was not previously deducted on a tax return”? Such as medical expenses you have deducted on your prior year’s Schedule A.

I’m a CPA

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]]> By: Jeff C http://netclubusa.net/federal-tax-return/i-have-received-a-settlement-from-a-class-action-lawsuit-do-i-have-to-claim-this-as-income-on-fed-tax-return/comment-page-1/#comment-2413 Jeff C Mon, 28 Jun 2010 04:32:11 +0000 http://netclubusa.net/federal-tax-return/i-have-received-a-settlement-from-a-class-action-lawsuit-do-i-have-to-claim-this-as-income-on-fed-tax-return/#comment-2413 Denmarks is correct. Only the punitive portion of the settlement is taxable. Any portion of the settlement which covers actual losses you sustained is not taxable. I'm a CPA Denmarks is correct. Only the punitive portion of the settlement is taxable. Any portion of the settlement which covers actual losses you sustained is not taxable.

I’m a CPA

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]]> By: spicertax http://netclubusa.net/federal-tax-return/i-have-received-a-settlement-from-a-class-action-lawsuit-do-i-have-to-claim-this-as-income-on-fed-tax-return/comment-page-1/#comment-2371 spicertax Sun, 27 Jun 2010 17:32:34 +0000 http://netclubusa.net/federal-tax-return/i-have-received-a-settlement-from-a-class-action-lawsuit-do-i-have-to-claim-this-as-income-on-fed-tax-return/#comment-2371 It depends on the type of class action. If stock market related it is a long term gain or cost basis decrease if you still own the stock. If for class action not related to lost income or gains then it is nontaxable. You did not say what kind of class action. 4 years as a tax professional who keeps current with tax laws unlike someone else (WhichTwo). It depends on the type of class action. If stock market related it is a long term gain or cost basis decrease if you still own the stock. If for class action not related to lost income or gains then it is nontaxable. You did not say what kind of class action.

4 years as a tax professional who keeps current with tax laws unlike someone else (WhichTwo).

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]]> By: Kenshin http://netclubusa.net/federal-tax-return/i-have-received-a-settlement-from-a-class-action-lawsuit-do-i-have-to-claim-this-as-income-on-fed-tax-return/comment-page-1/#comment-2322 Kenshin Sun, 27 Jun 2010 03:43:32 +0000 http://netclubusa.net/federal-tax-return/i-have-received-a-settlement-from-a-class-action-lawsuit-do-i-have-to-claim-this-as-income-on-fed-tax-return/#comment-2322 Just go to this web site at IRS and it will help you answer that question: http://www.irs.gov/pub/irs-pdf/p4345.pdf 4 years as a tax professional who keeps current with tax laws unlike someone else (WhichTwo). Just go to this web site at IRS and it will help you answer that question:

http://www.irs.gov/pub/irs-pdf/p4345.pdf

4 years as a tax professional who keeps current with tax laws unlike someone else (WhichTwo).

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]]> By: denmarks http://netclubusa.net/federal-tax-return/i-have-received-a-settlement-from-a-class-action-lawsuit-do-i-have-to-claim-this-as-income-on-fed-tax-return/comment-page-1/#comment-2258 denmarks Sat, 26 Jun 2010 09:30:14 +0000 http://netclubusa.net/federal-tax-return/i-have-received-a-settlement-from-a-class-action-lawsuit-do-i-have-to-claim-this-as-income-on-fed-tax-return/#comment-2258 After looking the the IRS website it seems that any amount covering your loss is not taxable but any punitive amount is. It is confusing and if it is a large amount I would consult a tax profesional rather than trust someone at this site. 4 years as a tax professional who keeps current with tax laws unlike someone else (WhichTwo). After looking the the IRS website it seems that any amount covering your loss is not taxable but any punitive amount is. It is confusing and if it is a large amount I would consult a tax profesional rather than trust someone at this site.

4 years as a tax professional who keeps current with tax laws unlike someone else (WhichTwo).

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]]> By: Kitty http://netclubusa.net/federal-tax-return/i-have-received-a-settlement-from-a-class-action-lawsuit-do-i-have-to-claim-this-as-income-on-fed-tax-return/comment-page-1/#comment-2186 Kitty Fri, 25 Jun 2010 15:29:19 +0000 http://netclubusa.net/federal-tax-return/i-have-received-a-settlement-from-a-class-action-lawsuit-do-i-have-to-claim-this-as-income-on-fed-tax-return/#comment-2186 ABSOLUTELY ! however it is NOT "earned" income so be sure to go to an accountant this year and he him/her do it right ! Remember it is a good thing to pay someone smarter than you to work things for you! Happy tuesday ! : ) 4 years as a tax professional who keeps current with tax laws unlike someone else (WhichTwo). ABSOLUTELY ! however it is NOT “earned” income so be sure to go to an accountant this year and he him/her do it right !

Remember it is a good thing to pay someone smarter than you to work things for you!

Happy tuesday !

: )

4 years as a tax professional who keeps current with tax laws unlike someone else (WhichTwo).

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]]> By: fijisun http://netclubusa.net/federal-tax-return/i-have-received-a-settlement-from-a-class-action-lawsuit-do-i-have-to-claim-this-as-income-on-fed-tax-return/comment-page-1/#comment-2123 fijisun Thu, 24 Jun 2010 21:31:52 +0000 http://netclubusa.net/federal-tax-return/i-have-received-a-settlement-from-a-class-action-lawsuit-do-i-have-to-claim-this-as-income-on-fed-tax-return/#comment-2123 It depends on the type of income it is classified as. Not all income received through legal settlements are income for tax purposes. You need to check with the attorney to see if this is income that is includable as income. If not, they should tell you why. 4 years as a tax professional who keeps current with tax laws unlike someone else (WhichTwo). It depends on the type of income it is classified as. Not all income received through legal settlements are income for tax purposes. You need to check with the attorney to see if this is income that is includable as income. If not, they should tell you why.

4 years as a tax professional who keeps current with tax laws unlike someone else (WhichTwo).

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]]> By: spot http://netclubusa.net/federal-tax-return/i-have-received-a-settlement-from-a-class-action-lawsuit-do-i-have-to-claim-this-as-income-on-fed-tax-return/comment-page-1/#comment-2060 spot Thu, 24 Jun 2010 05:32:17 +0000 http://netclubusa.net/federal-tax-return/i-have-received-a-settlement-from-a-class-action-lawsuit-do-i-have-to-claim-this-as-income-on-fed-tax-return/#comment-2060 I heard in the past settlement is not taxable just like life insurance. But again, it could depends on the amount and the nature of the settlement. I suggest consulting an attorney unless it's only a few hundred dollars. 4 years as a tax professional who keeps current with tax laws unlike someone else (WhichTwo). I heard in the past settlement is not taxable just like life insurance. But again, it could depends on the amount and the nature of the settlement. I suggest consulting an attorney unless it’s only a few hundred dollars.

4 years as a tax professional who keeps current with tax laws unlike someone else (WhichTwo).

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]]> By: Lioness http://netclubusa.net/federal-tax-return/i-have-received-a-settlement-from-a-class-action-lawsuit-do-i-have-to-claim-this-as-income-on-fed-tax-return/comment-page-1/#comment-2001 Lioness Wed, 23 Jun 2010 13:38:42 +0000 http://netclubusa.net/federal-tax-return/i-have-received-a-settlement-from-a-class-action-lawsuit-do-i-have-to-claim-this-as-income-on-fed-tax-return/#comment-2001 Unfortunately, yes. However, if you had an attorney representing you, the attorney can be paid their portion instead of you having to get taxed on the entire amount. 4 years as a tax professional who keeps current with tax laws unlike someone else (WhichTwo). Unfortunately, yes. However, if you had an attorney representing you, the attorney can be paid their portion instead of you having to get taxed on the entire amount.

4 years as a tax professional who keeps current with tax laws unlike someone else (WhichTwo).

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]]> By: BiancaVee http://netclubusa.net/federal-tax-return/i-have-received-a-settlement-from-a-class-action-lawsuit-do-i-have-to-claim-this-as-income-on-fed-tax-return/comment-page-1/#comment-1948 BiancaVee Tue, 22 Jun 2010 21:34:01 +0000 http://netclubusa.net/federal-tax-return/i-have-received-a-settlement-from-a-class-action-lawsuit-do-i-have-to-claim-this-as-income-on-fed-tax-return/#comment-1948 Yes, because it is income 4 years as a tax professional who keeps current with tax laws unlike someone else (WhichTwo). Yes, because it is income

4 years as a tax professional who keeps current with tax laws unlike someone else (WhichTwo).

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