You should be aware if you have been awarded money or damages through a court of law that the fund may be taxable. To figure how if any settlements or judgements are supposed to be included in your yearly income you need to determine what item the money is taking place of. The below items need to be added to your yearly income for tax purposes:
- Any interest that results from an award
- Income that was awarded due to loss wages or profits
- Punitive damages
- Income from pension rights, that you did not contribute to
If you were awarded any damages through the courts you will need to include the following as income:
- Patent breaches or copyright infringements
- Contract violations
- Damages due to obstruction of business operations
- Any awards that were gained under the Age Discrimination in Employment Act
If you are awarded settlements from cases of personal injury or physical sickness you are not required to calculate these into your taxes, whether if you took installment or a lump sum payment.
If you received a monies from a judgement due to character defamation, surrendering the custody of a minor or alienation of affection you are subject to special requirements.
