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Is my compensation for personal injury taxable?

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Latest post Wed, Nov 30 2016 8:56 PM by leswyt. 3 replies.
  • Wed, Nov 30 2016 1:40 AM

    • leswyt
      Consumer
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    • Joined on Wed, Nov 30 2016
    • CA
    • Posts 2

    Question [=?] Is my compensation for personal injury taxable?

    Hi, I'm from California. I have a doubt regarding the taxation of the compensation for my personal injury suit.

    I fell on the slippery floor of a local grocery and sustained a hip injury which is going to put me out of work for a month or so. I will be suing the shopkeeper for not putting up a warning board on the slippery floor. I had a road accident three years back and sustained an unhealed neck ache, which came on and off. After a long time in therapy, the pain was kept at bay temporarily. However, after the fall, I began to experience an alleviated pain on my neck. I have the report from my doctor for my ache in the neck.

    My question is would I be entitled to compensation for the secondary injury sustained, that is my alleviated neck pain? If so, is it taxable? Cause I read it in the blog of a law portal as such.

    "Compensation received for emotional distress and mental anguish not directly related to physical injury or physical sickness is taxable. Defamation, invasion of privacy, discrimination, harassment, and wrongful termination would be examples of taxable money. Regardless of the type of case, punitive damages are generally taxable. Finally, a settlement award with compensation for lost wages or loss of income is taxable and must be reported on a tax return"

    http://thelawfirm.com/taxable-income.html

    I don't know if it's the result of the fall or the mental trauma that has triggered my neck pain. I would like to get good compensation for my loss of income and mental stress.

    Please share your knowledge on this.

    Thank you.

     

  • Wed, Nov 30 2016 9:09 AM In reply to

    Re: Is my compensation for personal injury taxable?

    leswyt:
    My question is would I be entitled to compensation for the secondary injury sustained, that is my alleviated neck pain?

    BTW, look up the definition of "alleviated."  I think you mean "aggravated."

    If you can show that your fall set back the healing process for your neck injury, you'd be entitled to compensation for the additional medical expenses needed for a longer recovery.  You'd have to convince the store or its liability-insurance company or the judge that you needed to spend $X more on your neck injury because of the fall than you otherwise would have had to.  BTW, you should be aware that I, like most others on this forum, am not a lawyer.

    leswyt:
    If so, is it taxable?

    Hopefully Taxagent or someone else with strong tax knowledge will also reply, but in the meantime:

    Reimbursement for money you had to pay doctors to treat your injuries should be nontaxable.  And it makes sense that compensation for lost wages should be taxed because the wages would have been taxed.  It would be logical to owe Social Security and Medicare taxes on that money as well as income tax, but I'm no tax expert.

    leswyt:
    I don't know if it's the result of the fall or the mental trauma that has triggered my neck pain.

    Didn't your doctor have anything to say about that?  Are you going around with your shoulders tensed and/or hunched because of an emotional condition (e.g. worry about bills, or anger at the store)?

  • Wed, Nov 30 2016 9:10 AM In reply to

    Re: Is my compensation for personal injury taxable?

    leswyt:
    My question is would I be entitled to compensation for the secondary injury sustained, that is my alleviated neck pain? If so, is it taxable?

    Alleviated?  To alleviate your neck pain would be a good thing, so I assume you meant to write "aggravated."

    If you have an existing condition that is aggravated by the negligence of another, the aggravation is compensable, but proving it is often difficult.  Since you wrote that you "will be suing the shopkeeper" (and I'm curious why you've made that decision without apparently having at least consulted with an attorney) I assume you will be retaining an attorney, and this is something you should discuss with him/her.

     

    leswyt:

    Cause I read it in the blog of a law portal as such.

    "Compensation received for emotional distress and mental anguish not directly related to physical injury or physical sickness is taxable. Defamation, invasion of privacy, discrimination, harassment, and wrongful termination would be examples of taxable money. Regardless of the type of case, punitive damages are generally taxable. Finally, a settlement award with compensation for lost wages or loss of income is taxable and must be reported on a tax return"

    Whether you are entitled to compensation for a pre-existing condition is a completely different issue from the issue of whether any award you receive will be taxable, and this quote doesn't appear to have anything to do with your situation.  Based on your description of what happened, you may be entitled to recover damages for: (1) past and future medical expenses; (2) past and future lost earnings; and (3) "pain and suffering."  The first item is not taxable and, since the third item relates to the first item, it isn't taxable either.  The second is taxable (because it's replacing income that otherwise would be taxable).  I'm curious, though, why, at this apparently early stage, you're at all concerned about this issue.

  • Wed, Nov 30 2016 8:56 PM In reply to

    • leswyt
      Consumer
    • Not Ranked
    • Joined on Wed, Nov 30 2016
    • CA
    • Posts 2

    Re: Is my compensation for personal injury taxable?

    Sorry for the typo, I was meaning aggravated the condition.

    Okay, now I get a clearer picture. I have fixed an appointment with an attorney and I hope that everything will be sorted out quickly.

    The previous therapist had told me that my ache in the neck spikes if I get depressed or anxious. Obviously, I am not in a pleasant mood in current circumstances. 

    Thanks for your inputs and support.

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