Do we report Medical Malpractice lawsuit settlement to IRS?

Asked over 2 years ago - Albuquerque, NM

I will be receiving a wrongful death settlement on behalf of my daughter from a hospital, she had no children and was not married. Do I need to report this to IRS? Do I have to pay taxes on it? I also receive Social Security Disability will I loose my benefits?

Attorney answers (4)

  1. Timothy Lawrence Van Eman

    Contributor Level 9

    2

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    Answered . Mr. Regar's comment is correct. Also, try to convince your lawyer to be sure the insurance company paying the money does NOT use your social security number for anything related to payment of the settlement. That way, the insurance company will not generate a 1099-MISC to you showing that you received any money. That said, it still shouldn't be taxable.

    Discuss the issue with the lawyer who worked on the case and / or with a CPA before you file your tax return.

  2. Jacob Adam Regar

    Contributor Level 16

    2

    Lawyers agree

    Answered . A wrongful death award is not taxable (it is within the IRC section 104 exclusion for payments on account of "personal injury or sickness"). See also, Norfolk & Western Ry. Co. v. Liepelt (1980) 444 US 490.

    You can report the settlement, but it wouldn't be taxable.

    Whether it will affact your SSI benefits, I will have to defer to my collegues' answers.

    You can contact an attorney in your state to discuss this matter or if you are currently represented, you can ask your lawyer for further information.

    This website contains general information about legal matters. The information provided by Jacob Regar is not... more
  3. Joseph Jonathan Brophy

    Contributor Level 20

    2

    Lawyers agree

    Answered . I agree that a wrongful death settlement is not taxable.

    Social Security Disability (SSD) has nothing to do with your resources, you are eligible if you paid payroll taxes over enough years and are now unable to work. Supplemental Security Income (SSI) is means tested, it has nothing to do with your payroll taxes or past work, and if you have any significant amount of money, you will not be eligible. If this does not answer your question clearly enough, post a comment to clarify and i will try to give more information.

    Any opinions stated in response to Avvo questions are based upon the facts stated in the question. Responses to... more
  4. Lars A. Lundeen

    Pro

    Contributor Level 20

    1

    Lawyer agrees

    Answered . These are all good questions that you need to direct to the attorney who is handling the wrongful death matter for you. Receipt of funds from the suit may place you above the resource amount allowed for SS I. You have not told us if you are an SSI recipient or not. Again, talk with your attorney.

    Legal Disclaimer:

    If this information has been helpful, please indicate below.

    Mr. Lundeen is licensed to practice law in Florida and Vermont. The response herein is not legal advice and does not create an attorney/client relationship. The response is in the form of legal education and is intended to provide general information about the matter within the question. Oftentimes the question does not include significant and important facts and timelines that, if known, could significantly change the reply and make it unsuitable. Mr. Lundeen strongly advises the questioner to confer with an attorney in your state in order to ensure proper advice is received.

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