Personal Injury and Taxation

In today's world, wherever you turn you may run into a tax - income tax, property tax, sales tax, gas tax…… and the list goes on. A question that needs to be answered for our personal injury clients is whether Uncle Sam wants his cut! Like many "law answers" -- it depends.

The good news is most of our clients do not pay income tax on their personal injury award. The reason is that most clients DO NOT take any of the health care costs as itemized deductions. If you did take a deduction for health care costs, then you need to complete line 21 of Form 1040 and report that portion of the award as income.

Any amount of the award that is attributed emotional distress is not taxable. I guess the IRS knows taxes alone give people distress so they stay away from this type of personal injury award.

What is taxed is the money you recover for lost wages or lost profits. Thus, you need to report recovery for lost wages on line 7 of Form 1040.

Whether you recover punitive damages is dependent upon the state you reside in. For example, Nebraska does not allow punitive damages. In states that allow punitive damages, the federal government will likely tax some of your money. Punitive damages would be reported to the IRS on line 21 of Form 1040.

Bend the Knee

Due to the popular show Game of Thrones, the term “bend the knee” has made its way into public conversations. In the HBO show, the term is basically a submission and a pledge of loyalty to a king or queen. In the real world, the term “bend the knee” has also taken on new significance over the last year. Even if you are not a football fan you probably heard about professional football players kneeling during the National Anthem, which is played before a game is started.

The Incorporation Process

The process of creating a tax-exempt organization is generally viewed as a difficult process and while the individual steps can be daunting and time consuming, the differences between beginning a corporation and beginning a tax-exempt corporation are largely similar. This article will discuss the chief differences that should be noted when starting a tax-exempt corporation as well as briefly address liability issues with unincorporated organizations and LLCs. The focus of this article is on Nebraska and corporations being formed under its laws, however, because tax-exemption is largely a creature of federal law much of the article is applicable to corporations formed in other states as well so long as care is given to address differences in state corporate law.

Question 5: How could Jeannette Rankin have served in Congress before the Nineteenth Amendment (woman suffrage) was adopted?

Next question in the series “Things You Should Know According to Your Neighborhood Lawyer – Constitution Edition” Question 5: How could Jeannette Rankin have served in Congress before the Nineteenth Amendment (woman suffrage) was adopted? Answer: “The Constitution never prohibited women from voting or serving in public office, leaving that for the states to decide. […]