Won a settlement with a creditor and am trying to find the best way to pay the taxes on it. Can I pay now and get I'd over with? Do I wait till next years tax season since I already did my taxes this year? Any advise would be greatly appreciated.
In short, you should report the settlement income in the year the settlement agreement was signed and dated. You can amend your 2016 tax return by finding a local tax attorney.
At the federal level, whether the settlement is taxable depends on what the settlement agreement allocates each portion to. For example, if your settlement was to reduce the balance of your debt, that would be cancellation of debt income and taxable in the year you received that settlement. If you won damages outside of cancelling your debt, that portion would also be taxable in the same year you received the settlement agreement.
I recommend speaking to a tax professional at your earliest convenience to avoid or minimize penalties and tax liability.
The information provided is for informational purposes only, and does not create an attorney-client relationship.
First, you need to know if it is taxable. If it is, you would pay tax on it in the year received (be that 2016, 2017 or another year). If it is 2017 you would include any taxable amount in your income tax filing for 2017 (Due 4/15/18)
This is not legal advice nor intended to create an attorney-client relationship. The information provided here is informational in nature only. This attorney may not be licensed in the jurisdiction which you have a question about so the answer could be only general in nature.
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