I received an annuity payment from a law suit, do I have to report it and do I pay taxes?
The lawsuit was actually a settelment from a car crash I was involved in, the length of the annuity contract was 10 years.
The lawsuit was actually a settelment from a car crash I was involved in, the length of the annuity contract was 10 years.
It depends on what the payment is for (yes, I know a car wreck). But, I am referring to the actual damages…was pain and suffering (or what)?
It depends on the type of settlement. Pain and suffering no but punitive damages yes.
Whether taxes will be due depends on the type of award, and if you own the annuity.
If your award was for physical injury, the amount of the award is not taxable.
If the award was used to purchase an annuity, and the annuity is owned by you, then earnings from the annuity will be taxable to you. You will receive a tax document (1099R) from the annuity company showing the amount distributed and the taxable amount. This data must be entered in your tax return and may cause some tax to be due.
If the award was for other than physical injury, there may be taxes due on the initial award. You’d have to have someone look at the award itself to determine whether taxes may be owed.