the money you received is not taxable - you should still confirm with your accountant
we will not take any action on this case until we have a signed retainer agreement
It is NOT taxable income for any purpose.
If this information has been helpful, please indicate by providing feedback that the answer was either "helpful" or "best answer" as appropriate. Legal Disclaimer: Mr. Candiano is licensed to practice law in Illinois and Indiana. 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.
I agree with my colleagues that it's not taxable but you shouldn't take tax advice from lawyers. Take tax advice from accountants.
Here is a link to Internal Revenue Code 104(a)(1) which states that your workers compensation payments are not taxable. http://www.law.cornell.edu/uscode/text/26/104
Disclaimers: Making a false or fraudulent workers compensation claim is a felony subject to up to 5 years in prison or a fine of up to $50,000 or double the value of the fraud, whichever is greater, or by both imprisonment and fine. Each case is pursued differently based on its own merits. As such, there is no guarantee as to the outcome of any case. No attorney/client relationship will be established by contact with this AVVO answer or any messages or emails from Silberman and Lam, LLP. Attorney/client relationship will begin only when a retainer has been signed.
No, but be careful if you are also getting Social Security Disability Income or some retirement benefits.
According to the IRS' Publication 525 (2013), "amounts you receive as workers' compensation for an occupational sickness or injury are fully exempt from tax if they are paid under a workers' compensation act or a statute in the nature of a workers' compensation act. The exemption also applies to your survivors. The exemption, however, does not apply to retirement plan benefits you receive based on your age, length of service, or prior contributions to the plan, even if you retired because of an occupational sickness or injury.
If part of your workers' compensation reduces your social security or equivalent railroad retirement benefits received, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable."
Always consult an accountant if there are other sources of income that are either offset by your workers compensation settlement or adjusted as a result of that settlement.