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The Five Key IRS Rules of Taxation for Lawsuit Settlements

Coming out on the winning side of a lawsuit as a plaintiff can be a gratifying feeling, especially if there is a financial settlement involved. There is likely a sense of both relief and vindication. Unfortunately, far too often people are in for a big shock when they realize that they must pay taxes on the award. You can even be taxed on your attorney fees! However, a little tax planning can go a long way, especially if you do it before the settlement is finalized and the award is substantial.

Below are the five key rules to know so you can make the right move.

Conclusion

The taxation of legal settlements and awards are nuanced and largely depend on the facts and circumstances of the case at hand. There are, however, many opportunities through proper tax planning to minimize the tax consequences, but only if you are proactive and plan early in the process. CPAs Memphis TN.

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