Friday, April 6, 2007

How an Insurance Class Action Settlement is Taxed

Getting a monetary settlement from an insurance company as a result of a class action lawsuit isn't necessarily pennies from heaven. The money carries tax consequences that you'll need to address when you prepare your annual income tax return.

If you have any questions on how to treat your particular settlement proceeds, it's best to ask your tax consultant or accountant. But here are some general guidelines on what to do when it's time for your annual report to Uncle Sam.

Ordinarily, any income you receive is taxable. (In the insurance world, an exception to this is the proceeds of a life insurance policy to which you're a beneficiary.)

Policyholders eligible for compensation in a class action lawsuit may be offered several options. For instance, Prudential Insurance Co. offered three "relief choices" to policyholders eligible for its 1997 class action settlement. The choices included a refund of premiums (with interest) and two types of "basic claim relief." There could be taxable money involved in each choice.

If you opt for a return of premium with interest, the premium is not subject to taxes, but the interest would be. For other settlement options, distributions from a life insurance policy are not taxable until you've received more money than you paid in premiums. Any amount above that is taxed at the ordinary income rate.

You'll need a Form 1099

If you receive insurance lawsuit settlement money, you'll need an Internal Revenue Service (IRS) Form 1099 that shows the amount of money you received and from whom. There are several types of 1099 forms that report on earned gross income (money from which taxes have not been deducted).

You might get a Form 1099MISC, which applies to miscellaneous income. A 1099MISC shows the total amount you received, so look for an accompanying letter from the insurer that breaks down how much of your settlement is a return of your premium and how much is interest or other settlement benefits. If that happens and you don't get a letter that breaks out the amounts, you can either figure out yourself what premiums you've paid into the policy or call your insurance company and have them do it for you. Bring this information to your tax preparer.

On the other hand, the insurance company may send you a Form 1099INT, which lists the interest payment of your premium that you received. This interest amount is probably subject to income taxes, and you should bring that form to your tax preparer.

It is up to the insurance company which Form 1099 they will use. For your purposes, it's important that the amount you are awarded is broken down either in a letter from the insurance company or through Form 1099. Be sure you don't pay taxes on your returned premium, because you probably paid that premium with your after-tax dollars. Few of us want to pay taxes on that money twice.

The IRS Form 1099 must be sent out by the company from which you've received income, regardless of what type of income it is, by Jan. 31.



Blogger ninest123 Ninest said...

ninest123 09.29
louis vuitton outlet, cheap jordans, tory burch outlet, chanel handbags, prada outlet, michael kors outlet, michael kors outlet online, cheap oakley sunglasses, tiffany jewelry, nike outlet, ralph lauren outlet, uggs on sale, nike air max, christian louboutin, louboutin uk, nike free, uggs outlet, kate spade, oakley sunglasses, ray ban sunglasses, ralph lauren polo, oakley sunglasses, michael kors, replica watches, longchamp outlet, gucci handbags, prada handbags, replica watches, burberry factory outlet, uggs on sale, longchamp bags, uggs on sale, christian louboutin, ray ban sunglasses, louis vuitton, oakley sunglasses, louboutin shoes, ray ban sunglasses, louis vuitton outlet online, michael kors outlet store, nike air max, uggs outlet, michael kors outlet online, louis vuitton outlet, longchamp outlet, tiffany jewelry, burberry outlet, oakley sunglasses

September 28, 2015 at 6:41:00 PM PDT  
Blogger ninest123 Ninest said...

sac guess pas cher, michael kors outlet online, coach purses, coach outlet, true religion outlet, north face pas cher, north face uk, hermes pas cher, michael kors, louboutin pas cher, jordan pas cher, nike free, vans pas cher, kate spade outlet, longchamp pas cher, nike air max uk, nike roshe uk, michael kors uk, nike air max, nike tn pas cher, nike roshe run pas cher, burberry pas cher, ralph lauren pas cher, true religion outlet, timberland pas cher, michael kors, lululemon outlet, new balance, coach outlet store online, longchamp soldes, nike free pas cher, vanessa bruno pas cher, nike air max uk, nike air force, hogan sito ufficiale, lunette oakley pas cher, polo ralph lauren uk, polo lacoste pas cher, true religion outlet, abercrombie and fitch, mulberry uk, nike blazer pas cher, abercrombie and fitch UK, nike air max pas cher, true religion jeans, hollister uk, converse, coach outlet, lunette ray ban pas cher

September 28, 2015 at 6:45:00 PM PDT  
Blogger ninest123 Ninest said...

new balance shoes, insanity workout, softball bats, north face outlet, vans scarpe, abercrombie, nike air huarache, valentino shoes, hermes handbags, beats by dre, iphone cases, mont blanc, p90x workout, north face outlet, nike air max, hollister, mcm handbags, converse shoes outlet, polo ralph lauren, celine handbags, nike trainers uk, ghd hair, reebok outlet, gucci, salvatore ferragamo, nike roshe run, nfl jerseys, babyliss pro, ray ban, soccer shoes, jimmy choo outlet, converse, instyler ionic styler, lululemon outlet, bottega veneta, wedding dresses, mac cosmetics, vans outlet, nike air max, timberland boots, oakley, chi flat iron, asics running shoes, soccer jerseys, hollister clothing, herve leger, giuseppe zanotti, longchamp uk, abercrombie and fitch, louboutin, michael kors handbags

September 28, 2015 at 6:50:00 PM PDT  
Blogger ninest123 Ninest said...

lancel, moncler outlet, louis vuitton, moncler, montre pas cher, moncler, louis vuitton, sac louis vuitton, toms shoes, moncler, canada goose jackets, thomas sabo uk, louis vuitton uk, michael kors handbags, ugg,ugg australia,ugg italia, bottes ugg pas cher, michael kors outlet, barbour, moncler, ugg uk, ugg pas cher, sac louis vuitton, marc jacobs, pandora jewelry, wedding dresses uk, supra shoes, canada goose uk, doke & gabbana, canada goose outlet, canada goose pas cher, swarovski uk, barbour jackets uk, swarovski jewelry, moncler pas cher, juicy couture outlet, coach outlet, moncler uk, replica watches, michael kors outlet online, ugg,uggs,uggs canada, pandora uk, links of london uk, moncler jackets, canada goose outlet, hollister, pandora charms, juicy couture outlet, canada goose, canada goose, pandora jewelry, canada goose jackets
ninest123 09.29

September 28, 2015 at 6:57:00 PM PDT  
Blogger mmjiaxin said...

hollister clothing
hollister canada
coach outlet online
true religion jeans
ray-ban sunglasses
mac cosmetics
karen millen uk
michael kors outlet online
louis vuitton outlet online
coach outlet store
fitflops clearance
canada goose outelt
mbt shoes outlet
ralph lauren,polo ralph lauren,ralph lauren outlet,ralph lauren italia,ralph lauren sito ufficiale
moncler outlet store
mulberry uk
mulberry outlet,mulberry handbags outlet
oakley,occhiali oakley,oakley italia,oakley occhiali,oakley sunglasses
tory burch outlet
puma outlet

December 15, 2015 at 5:43:00 PM PST  
Blogger Mie Helal said...

I really like all the points you have made

January 25, 2017 at 1:36:00 AM PST  

Post a Comment

Subscribe to Post Comments [Atom]

<< Home