The Tax Questions Blog

Archive for August, 2009

Question: Tax Question- Reporting punitive damages?

I have received a personal injury settlement, I know the punitive damages are taxable. The lawyer has told me how much of the settlement is punitive damages, but I have not received any form or letter stating the punitive damage amount. So to report the damages on my taxes do I enter in the amount that he told me under misc income or do I leave it blank and not report it?

Answer: Line 21 of Form 1040, Other Income.

BTW, your attorney made a major error accepting a settlement with punitive damages. Had it been for pain and suffering, it would not have been taxable.

The settlement paperwork will spell out what each portion of the damage award is for. Anything for punitive damages, lost income or accrued interest is taxable. The rest is not.

Top Stories Of 2009: Karoly Court Drama

var nopreviewimage = ""; if (nopreviewimage == ""){ document.write(' '); } var new_intro = new String(" He's famous for winning high profile cases against police departments in the Lehigh Valley.  In 2009, John Karoly was at the center of another huge court battle. A battle he lost.  69 News viewers voted Karoly's court drama the 5th biggest Lehigh Valley story for 2009. WFMZ's Jaccii Farris ...

Does the IRS Tax Money Saved From A Debt Settlement

Question: UK tax question...is this correct?

Hi guys,

I just started working on October 13th 2008 and I earn a gross amount of £13,000 per year. Prior to that I had carers' allowance (which I believe is the only taxable social security benefit I had which totalled £1,421 between April 6th 2008 and 10th October 2008.

Am I right in thinking that for tax reasons, I have earned taxable income of £1,421 + £6,035 (my wages up to april 2009) and that given my personal allowance is £6,035 for the tax year, then my taxable income is only £1,636 for this tax year and so my tax should be £327.20) plus any NIC? I am also ignoring any working tax credits issued by the HMRC

I got my first payslip for 2 weeks work in October and the HMRC has taken £250 off me in tax and NIC already.

Your advice would be appreciated

Answer: First of all, HMRC do not deduct tax from your pay - this is your employer's reposnsibility. Your calcualtions of tax due this year are correct and in order to make this work out, you need to be on the correct tax code. You are on emergency code as your employer does not know about the carer's allowance. You now need to ring your tax office (employer will have the number) and ask them to issue a proper code to your employer taking into account the carer's allowance. They may ask you to put this in writing. Once the cumulative code is issued, your employer will make your refund.

How I sinned (and did a couple of good things) in 2009

We all have our year-end rituals. Mine is to examine what I've written during the year, follow up on yesterday's hot stories that have become today's overlooked stories, and to own up to my mistakes of omission and commission.

Question: 12 Trillion dollars of debt, but our GDP is 14 Trillion. We can pay it off easily?

If our GDP is almost 14 trillion, then cant we pay off our debt relatively quickly? ok, the GDP is 14 trillion, the government makes about 20% of that from taxes, so it makes about 2.8 Trillion. i understand some of that money goes to stuff, like transportation/infrastructure, and medical care, etc, which i believe is something like 40%, so that means 2.8 Trillion times 40% = 1.12 Trillion goes to public things. which leaves the government with 1.68 trillion. So, we can pay everything off relatively quickly, no? I mean, the wars are included in this calculation, right? i know im missing somethings, but what? can u guys get me a link to clear all this up for me?

Answer: If the government is only spending 40% of tax revenue on "stuff", then there is no reason for there to be a deficit. Given that there is a deficit, that means that your 40% figure is wrong. The government is spending more than it is taking in. The debt will continue to expand.

By Joseph Palmersheim - Sun Newspapers

People had plenty to talk about in 2009: H1N1, the deaths of celebrities like Michael Jackson and an employment rate that left 1 in 10 Americans out of a job.

$78.8 Trillion; United States Debt Obligations exceed world GDP; Monetary Collapse Looming?

Question: Just realized I have to file the Foreign Bank Account Report (FBAR)?

It's due 4 days from now, on June 30. I'm in Europe and will send it priority post (can't Fedex to a PO Box), but there's still no guarantee it will arrive there by the 30th.
Any additional advice? Should I be worried about the threatened penalties and fines?
Nope, unfortunately unlike a tax return, postmarks don't seem to count here, this is very clear..

http://foreignbankaccountamnesty.com/category/fbar-filing-requirements/

http://www.irs.gov/businesses/small/article/0,,id=148845,00.html

you're right, the IRS site is vague. and sorry, I had the wrong link...I'm finding a ton of sites that all claim they are really harsh on this- and the penalties are huge

http://foreignbankaccountamnesty.com/fbar-filing-requirements/fbar-deadline-extended-sort-of/

http://taxes.about.com/od/preparingyourtaxes/a/TDF90221.htm

But yeah you're probably right

Answer: The postmark date will cover you. There's nothing in the IRS article that states that the postmark does not apply. The postmark date applies for all IRS returns and reports unless the instructions explicitly state otherwise. (The amnesty site refers to prior year unfiled returns, not the current year return, under an amnesty program. The postmark date is always acceptable otherwise.) Send it certified mail (often called registered mail or recorded delivery in foreign countries) for proof of the mailing date.

You can also hand carry it to the Tax Attache at the nearest US Embassy (or FedEX or any other local express carrier if you wish) if you are unsure of the foreign postmark being legible.

Virginia Doctor Pleads Guilty to Conspiracy Involving Undeclared Swiss Bank Account

WASHINGTON, Feb. 16 /PRNewswire-USNewswire/ -- Dr. Andrew Silva of Sterling, Va., pleaded guilty today to conspiracy to impede the United States and to making a false statement, the Justice Department, Immigration and Customs Enforcement (ICE), U.S. Postal Inspection Service (USPIS) and the Internal Revenue Service (IRS) announced.

IRS Offshore Account Amnesty: What if you don't owe any tax?