A settlement related to a physical injury or illness may not be taxed, but certain portions may be taxable. If you are worried about the tax implications of your settlement, a Suffolk County wrongful death lawyer may be able to help you out. They may work with you to help you get the maximum amount of compensation, regardless of the tax implications.

Carner & DeVita offers legal help in wrongful death cases. Our team is available to review your case. To learn more, reach out to us. In the meantime, we answer the “Are wrongful death settlements taxable?” and related questions below.

A man typing on a calculator with glasses in front of that as he stares at his wrongful death settlement while he does his taxes.

When is a wrongful death settlement taxable?

The taxability of a wrongful death settlement depends on the circumstances surrounding it. A part of a settlement may be taxed if it covers medical costs deducted from income in prior years. Some portions of a settlement may be taxed if they relate to emotional trauma. You may have to pay taxes if a lawsuit or insurance settlement includes punitive damages.

How much will I pay in taxes based on a wrongful death settlement?

It depends on your settlement. You may not be required to pay any taxes. If you are required to pay, your tax burden may be based on the money you receive and why damages were awarded.

Do I have to report a death settlement to the IRS?

The taxability of your settlement varies based on your case. Sometimes, you must report portions of a settlement to the IRS. If you’re legally required to report compensation you get from a settlement to the agency but choose not to, the IRS may punish you accordingly.

What will happen if I don’t pay taxes on a death settlement?

You won’t be punished if you get a settlement that’s not taxed. Conversely, if you’re required to pay taxes on a settlement and don’t, you may incur a failure to pay the penalty of 0.5% on your unpaid taxes for each month or portion of a month they aren’t paid. This penalty may escalate over time. You may also face other tax penalties.

Who has to pay the taxes on a death settlement?

If parts of a settlement are taxable, the individual who received the compensation may be required to pay the taxes. For instance, if you’re the plaintiff in a wrongful death case, you may be responsible for any taxes relating to your case settlement.

Will I get a 1099 form for death settlement taxes?

You may only receive a 1099 if you receive taxable compensation. For example, if a judge or jury awards punitive damages, you may have to complete a 1099.

How can I avoid taxes on a death settlement?

You may not be able to avoid taxes on a settlement altogether. Alternatively, you may be able to work with a wrongful death lawyer who knows the ins and outs of the legal system. Your attorney may help you navigate the challenges of a death claim. They can explain the legal process and work to help you get a fair settlement. Your lawyer may also look for ways to help you minimize your tax liability.

How can I get help with wrongful death settlement taxes?

Since 1957, the team at Carner & DeVita has helped clients with wrongful death cases and many other types of claims. We can provide guidance if you’re worried about taxes on a death settlement. For more information or to request a free consultation, contact us online or at (631) 543-7070.