Pleading Ignorance Archive

Ever Wonder if Lawsuit Settlements and Verdicts are Taxable?

July 8th, 2010. By Kristine B

It’s probably one of the biggest questions people involved in lawsuits ask. Is my settlement money taxable? (In other words, how much of this money do I get to keep and how much of it goes to the government?) This week, Pleading Ignorance examines settlements/verdicts, and how much of the money really is yours.

Like everything in life, what is and isn’t taxable is complicated. Whether or not the money in a settlement is taxable depends on a number of factors, because nothing in income tax is ever simple. According to Jeff Schnepper at moneycentral.msn.com (12/04/09), there must be a physical injury for the settlement to be free from tax. So, an award for wrongful termination would be taxable because there is no physical injury.

In fact, there are two requirements to ensure a settlement (or a verdict) is tax-free. The first, as mentioned before, is that there must be a physical injury (which includes illness). Without physical injury, you’re paying taxes.

The second is that the injury must have been caused by a wrongful act. This means that the other party must have committed a wrongful act, which caused your injury. So, if someone was negligent and injured you, your award or settlement would be tax-free. But, if the lawsuit was caused by a dispute that didn’t involve wrongdoing, the award would be taxable.

Punitive damages are taxable, regardless of whether or not they are related to a physical injury. The government taxes citizens on income and punitive damages; because they are not compensating the plaintiff for money lost, those damages are seen as above and beyond what would be needed to make the victim whole.

Emotional distress is not considered a physical injury. So, even if emotional distress results in your feeling ill, emotional distress on its own is taxable. Emotional distress is tax-free when it is linked to a physical injury. For example, if you injure your neck and this results in emotional distress, your award for emotional distress is tax-free.

If, however, you were wrongfully terminated from your job and this resulted in emotional distress, any award for emotional distress is taxable.

Awards for lost wages are, in most cases, taxable because they replace income that would have been taxable.

Tags: Pleading Ignorance, Settlement, Settlement Money, Tax
Posted in Emerging Issues, Pleading Ignorance, Settlement | 10 Comments »

Should I File a BP Claim? Do I Need to File a BP Lawsuit?

June 24th, 2010. By Kristine B

Ok, so for the past week, there’s been a lot of news on the BP $20 billion fund. And you’ve been reading about how quickly BP wants to release the monies to claimants. But many of you who’ve been affected by the BP oil spill may not know just what you’re supposed to do. You’ve probably got questions like…

Do I have to file a claim with BP?

Should I get a lawyer for my BP claim—or just submit a claim to BP?

Will my BP claim be enough to fully compensate me?

If I file a claim with BP, can I also file a lawsuit against BP?

Questions, questions. And a lot of confusion. Well, recently LawyersAndSettlements.com interviewed attorney Wes Pittman of The Pittman Firm, P.A. on this very subject. And I thought it would make a good topic for Pleading Ignorance—so here goes…

Yes, BP has indeed set aside a $20 billion fund for legitimate claims from people affected by the Gulf of Mexico oil spill. Although the news is good, that doesn’t mean it’s smooth sailing for all victims of the spill. Your first question is probably: 

Do I have to file a claim if I’ve been affected by the BP oil spill? 

One of the main ways that the claim fund affects victims is that victims must file a claim before they can file a lawsuit, according to attorney Wes Pittman. Pittman says filing a claim is a prerequisite for filing a lawsuit. So, if you intend to file a lawsuit, you must first file a claim with BP.

Fair enough. But…

Does filing a claim with BP mean I don’t have to file a lawsuit?

In a perfect world, that’s what this would mean. But this is not a perfect world and there are many variables in each claim. For example, BP says it will pay out all “legitimate” claims—take a look and you’ll see most quotes about the claims BP will pay mention the word “legitimate”. But, what BP sees as legitimate and what you and your lawyer see as legitimate may not be the same.

For example, there are many people indirectly affected by the oil spill. Consider event planners who make money planning events along the coast and have lost income because people don’t want Read the rest of this entry »

Tags: BP, BP Oil Spill, Pleading Ignorance
Posted in Environment, Pleading Ignorance | 3 Comments »

BP Disaster and Why the Jones Act Needs to Change

June 16th, 2010. By Kristine B

As the oil continues to make its way to shore, countless families try to cope with the economic impact of the BP oil spill. Meanwhile scores of birds and other animals that rely on the sea are dying in unprecedented numbers. But, it may be the deaths of the 11 men on the oil rig platform that could have the biggest impact on future oil drilling. If officials change US Maritime Law—which they should, it’s only right—BP could be forced to pay dearly for its alleged (yes, I’m still using alleged here) role in the oil rig explosion and deaths of the workers.

This week, Pleading Ignorance looks at US Maritime Law and the Jones Act to better understand what happens when a worker suffers injury or death while working on or for a sea-faring vessel or operation.

So, why does US Maritime Law need changing? The current situation is that under maritime law, families of people who die while working at sea are only able to sue for economic damages caused by the death. This includes things such as loss of income, medical bills and so on. They can’t sue for punitive damages. 

The problem is that it’s the punitive damages that hit home with companies like BP—and drive much needed change. Economic damages, in comparison, are relatively small. Here’s an example: say an oil rig worker makes $60,000 a year at the time of his death and still has an approximate Read the rest of this entry »

Tags: BP, BP Oil Spill
Posted in Pleading Ignorance | No Comments »

BP Oil Spill: The Fallout and Who’s Affected…Including You

May 27th, 2010. By Kristine B

With an environmental disaster as large as BP’s oil spill, no doubt many people are affected. Some are affected directly. Others, however, are affected indirectly and might not even realize it. This week, Pleading Ignorance gives some examples of people who might have no idea that this environmental disaster has affected them. We look at property damage, business losses and other effects of the oil spill.

BP Oil Spill + Property Damage + Property Ownership/Rental

Obviously Affected

Anyone in real estate knows it’s all about location, location, location. Most often, the choicest locations—particularly at the height of rental and time-share season—involves a beachfront somewhere, and that beachfront comes at a high price. Unfortunately, the BP oil spill has given new meaning to the phrase “tar beach” for folks who could afford a beachfront stretch. With oil encroaching upon their waterfronts, there’s property damage afoot. That damage could cost these homeowners for repair, maintenance and replacement of anything on the property damaged by oil, not to mention the cost of cleaning up.

The other damage that homeowners suffer is the loss of enjoyment of their property—their own, and that of others if they were planning on renting out their home. After all, who wants to enjoy the beach when the beach is covered by oil? So there’s potential loss of income, too.

Finally, there’s the loss in property value to consider. Try sticking a “for sale” sign up on beachfront property right now in, say, Louisiana or Alabama. If folks can’t use the beach, they sure aren’t going to come to an open house—let alone fork over a downpayment.

Possibly Affected

Even if you don’t live along the beach, if you live close to the beach—say, a few blocks off—you’ll also be affected by the oil spill. You may not suffer property damage, but proximity to the beach means that you enjoy the beach as one of the perks of your location. That’s a perk you probably still paid a hefty sum for. Because of the oil spill, you don’t have the option of enjoying the beach anymore. Nor would anyone you’d hope to sell your place to. And that adds up to a decrease in property value. 

People who rent long-term along the beach or near the beach are affected, too. Although they don’t suffer the same property damage as homeowners, they probably pay high rent for the sake of living near the coastline. Like homeowners, they no longer have use of the beach, something they pay for.

Basically, if part of your cost of residence involves use of the beach, you’re no longer getting what you paid for, through no fault of your own.

Remotely Affected

For those folks who vacation on the Gulf Coast each summer, you may have already paid for—or at least put a downpayment on—a rental. But chances are, you’ve been re-thinking that Read the rest of this entry »

Tags: BP, BP Oil Spill, Pleading Ignorance
Posted in Emerging Issues, Environment, Pleading Ignorance | 2 Comments »

Car Accident Fault and Getting What You’re Owed

April 21st, 2010. By Kristine B

If you’re one of those people who “don’t like to focus on fault”, you’ll quickly find yourself focusing on it should you be involved in a car accident. Not that anyone likes pointing fingers, but unfortunately, the state you live in probably uses a little finger-pointing to determine what damages should be awarded to each party in the aftermath of an accident. Some states use either Contributory or Comparative Negligence to determine damages…and you should know which, if any, your state uses.

 

Since I spoke with Missouri attorney John Page about comparative negligence, I thought it would be a great idea for this edition of Pleading Ignorance to explain what comparative negligence is, and compare it to contributory negligence. Knowing whether your state uses contributory negligence, comparative negligence—or even modified comparative negligence will help you to determine what damages you are entitled to if you are in a car accident. 

Note—here’s a refresher on negligence in general. Also, a number of you are probably familiar with the concepts of “Fault” and “No Fault” car insurance states—they’re related to this topic, but we won’t cover those here; look for them in an upcoming Pleading Ignorance. Now, back to car accident negligence… 

Contributory Negligence 

Contributory negligence is a system of fault in which the injured party can only obtain compensation for injuries and damages if he or she did not contribute to the accident in any way. This means that if you’re in a car accident and the driver of the other vehicle is 99 percent at fault but you are 1 percent at fault, you won’t receive any damages. You’re out of luck. You can’t in any way be even a little bit at fault for the accident or you’ll get nothing in monetary damages.  

So, to use an example: let’s say that Becky is attempting to make a left turn at an intersection. Chris speeds through the intersection on a red and hits Becky. The jury finds Chris 80 percent Read the rest of this entry »

Tags: Negligence, Pleading Ignorance
Posted in Accidents, Automotive, Pleading Ignorance | 1 Comment »