Settlement Agreement

[ajuroff]

Client received a redemption (settlement) from a work related injury from her employers workers' comp carrier. Total settlement was $206,000.00. The breakdown of the settlement is as follows:

Redemption Settlement Amount: 206,000.00

Attorney Expenses: 1947.24

Attorney Fees: 21,655.28

Redemption Fee: 100.00

Net to Plaintiff: 182,297.48

Of the original $206,000 settlement amount, $21,000 is allocated to a Medicare Set-Aside Allocation. Also, it states that the amount of $14,000.00 is factored into the allocation amount above for future prescription drug treatment.

I'm thinking not, but is any of the amount allocated above (of the $21,000) taxable?

(editing)

She also received $30,000 for wrongful termination. Of that amount, $13,398.43 went for Attorney fees.

[schirallicpa]

Don't you wish you were an attorney. Will you be collecting an additional 15% of the settlements for figuring the tax situation out?

[RoyDaleOne]

Amounts paid for bodily injury generally are not taxable.

Code Sec. 104. Compensation for injuries or sickness

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(a) IN GENERAL

Except in the case of amounts attributable to (and not in excess of)

deductions allowed under section 213 (relating to medical, etc., expenses)

for any prior taxable year, gross income does not include--

(1) amounts received under workmen's compensation acts as

compensation for personal injuries or sickness;

(2) the amount of any damages (other than punitive damages) received

(whether by suit or agreement and whether as lump sums or as periodic

payments) on account of personal physical injuries or physical

sickness;