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I was disabled in a auto accident I receive attendant care. Do I have to pay taxes?

Lake Orion, MI |

Several family members provide attendant care services for me and I just pay for the services out of the money that is issued from the insurance company. This year was the first time I have ever received a 1099. I Received a letter today from the insurance company stating that they do not have the correct information for me and that they needed me to fill out a W9, I'm very hesitant because I'm disabled and I don't want it to look as if I'm working. I appreciate all the help I can get. I know the insurance company will take advantage of you.

Attorney Answers 5

  1. The insurance company argument for why a 1099 is appropriate for people who recover attendant care is that this is ordinary income for work performed and therefore clearly taxable. I have spoken to tax experts on both sides of the issue. There is a case, Hatcher v. State Farm, 269 Mich App 596 (2005) that reached the exact opposite conclusion with regard to attendant care, stating that the right to benefits belongs to you as the injured person and therefore your insurance company should pay you the benefits directly and it is your subsequent responsibility to issue 1099s to your care providers. The money received by the providers is taxable as income on their returns, not yours.
    All of this is within the context of the documentation and support for people who receive attendant care benefits is being significantly tightened and you need to be extremely careful to comply. I am attaching a link to a recent Michigan Supreme Court case that discusses these new requirements:
    My best advice: talk to the lawyer who originally helped you to review your documentation and submittals and to refer you to a tax expert for you to talk with. There is no clear-cut answer, as of today, on the 1099 issue and there is a significant conflict of opinions.

  2. If you are providing attendant care services then the insurance company may 1099 you. Some insurance companies do this and some do not. Legally, you are supposed to fill out the W9 if you have been providing attendant care and receiving payments. The person preforming the attendant care is responsible for paying taxes on the income received. Attendant care as you probably know is nursing services and it is considered income. Good luck.

    You should consult an attorney in your State at once. This response does not constitute legal advise outside the State Of Michigan and is not intended to establish an attorney-client relationship with our offices. It is for informational use only of the general laws in the State of Michigan, only. To retain our offices, you need to sign a contingency contract with us. We do offer free consultations and we can refer clients to lawyers in your State if you call us. Visit our webpage and tell us what you think.

  3. You're recieving funds from the insurance company and they're clearly intending to issue you a 1099. You're expending these funds to cover expenses so it may be possible to offset the 1099 income with the expenses incurred. But no matter how you handle it, you should report the information properly on your tax return - otherwise there will be a mismatch of the information you report and the information the insurance company reports to the IRS...that's the material for audits. Make sure your taxes are prepared properly please and you'll avoid the hassle.

    Evan A. Nielsen is licensed to practice law in California. The information provided here is for educational purposes only and is not intended as legal advice for a particular matter. This response does not create any attorney-client relationship with the author. For specific advice about your particular situation, please consult an attorney.

  4. I suggest you contact the attorney who handled your legal claim and secured the insurance Company payments for you. I am sure the attorney will be glad to discuss this issue with you.

    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. .

  5. You may need a no-fault attorney to deal with the insurance company in regard to your not having to fill out the forms mailed to you. It would seem that the persons you compensate would have to pay taxes not you.

    Always consult an attorney IMMEDIATELY as there are time limitations on filing a lawsuit.

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