I received a settlement check from a class action law suit. The suit was for medical reasons. Do I have to pay taxes on this settlement check?
1 Answer from Attorneys
In 1995 Congress adopted section 104(a)(2) of the Internal Revenue Code. If the damages are on account of a tort or tort type of claim and on account of physical personal injuries, then they are excluded from taxation. Punitive damages are taxable and non-contingent attorneys fees are taxable. In deciding what type of damages are involved, the IRS may examine pleadings, correspondence, evidence presented in the case, the settlement agreement and anything else that may disclose the true nature of the claim. To evaluate your question further would require a similar review by me. Accordingly, I cannot give an opinion as to your particular case without such a review.