Compensation for physical injuries is not taxable. There is no such thing as the bank reporting you if you have a check over $10,000. If you have cash you are depositing over $10,000 in a single day it is a different story and the bank must report to the U.S. Treasury.
Any individual seeking legal advice for their own situation should retain their own legal counsel as this response provides information that is general in nature and not specific to any person's unique situation. Circular 230 Disclaimer - Advice given in this response cannot be used to eliminate penalties with the IRS or any other governmental agency.
You cannot be taxed on personal injury award and/or settlements but you can be taxed on settlements for lost wages, that is why I always am very clear to note that my settlements, where possible are for personal injuries.
Personal injury settlements, as long as they are for pain and suffering and not wage replacement, are non taxable. When an attorney handles your personal injury claim they are certain to designate the settlement to pain and suffering and therefore personal injury settlements are a non taxable event.
Deposits by check are not reported. Only cash deposits of $10,000 or more are required to be reported to treasury. Depositing a check "as cash" would trigger this reporting requirement, but if it is a simple regular deposit into your account, there is no report.
My office handles personal injury and accident cases in Massachusetts and New Hampshire.
Law Offices of Andrew D. Myers
North Andover, MA — Derry, NH
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Settlements for personal injury are not taxable income for federal income tax purposes. If any portion of the settlement is designated for lost wages, that portion of it is reportable and taxable.
Damages for personal injury caused by a physical injury are not taxed. I suggest you consult with your current attorney.
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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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