Why Is a W9 Form Required for a Personal Injury Settlement?
The tax rules that apply to a personal injury payout are complex. Some parts of the settlement could be taxable income, while others are not. For this reason, many insurance companies and other payors request tax information from Fort Myers personal injury attorneys and their clients. This generally comes in the form of an IRS Form W9. We explain more in this personal injury blog post.
Completing a W9 form for a personal injury settlement is often part of the final steps before the insurance company cuts a check. However, our Florida accident attorneys want to ensure our clients feel comfortable with why they need to submit this information. Call (954) 633-8270 now to learn more about our services and team during a free initial consultation.
Do All Personal Injury Cases Require a W9?
Not all personal injury cases require a W9 form, but many do. The purpose of a W9 is to ensure the recipient has the taxpayer information for the person or business completing the form. Generally, this is because they need to issue a Form 1099 at the end of the year.
So why does a plaintiff in a personal injury case need to complete a W9 for an insurance company? There are generally two reasons:
- Some of the payout might be taxable income.
- The company requires a W9 for all check recipients as a part of its protocols, regardless of whether it will issue a Form 1099.
Is My Personal Injury Settlement Taxable?
The tax laws related to personal injury settlements are complex. Generally, according to the Internal Revenue Service (IRS), you can expect:
- The money you receive for your physical injuries is non-taxable. This includes your medical bills.
- Any payments made for lost income to be taxable.
- Compensation for emotional distress, mental suffering, and other similar damages to be taxable income.
What Happens After We Negotiate a Settlement in My Case?
Many believe that once they reach an agreeable settlement, they will receive a check the same day. Unfortunately, it does not work that way. Instead, they must sign a release stating they will not pursue the case further and complete other paperwork, possibly including a W9 form. Then, the insurance company processes this paperwork.
They usually cut a check within a week or two and send it to our firm. We put it into escrow and take out any money owed. This could include:
- Medical bills or other liens placed
- Our attorney’s fees, as outlined in the contract
- Any other expenses included in the contract
- Money paid for other parties, such as the bank that financed a totaled car
Once we take out this money, we cut the client a check for the remainder.
Our Team Can Help Navigate the Next Steps
We can answer any questions during this process and help the client understand the purpose of these steps. There are many papers to sign, but this ultimately culminates with them receiving a check that holds the at-fault party accountable and gives them justice in their case.
Many of our clients choose to discuss their options with an accountant. This accountant can offer advice and help you handle your taxes for that year. They will know what is taxable income and what you need to include on your income taxes when the time comes.
Can I File a Lawsuit Based on My Injuries?
Most personal injury victims have a right to pursue fair compensation based on their injuries. The at-fault party is legally liable if someone else’s negligence caused their accident. Our team often seeks and secures money for our clients in cases based on falls, pool accidents, construction site injuries, and more.
Our West Palm Beach personal injury attorneys file claims and lawsuits, helping our clients hold these parties accountable and recover compensation. The payouts in these cases could include money for:
- Medical care
- Future care costs
- Income losses
- Reduced earning capacity
- Other related expenses
- Pain and suffering losses
One exception to this could be if your injuries occurred in a car accident. Under Florida Statutes § 627.730 and the following statutes, Florida establishes a no-fault system for car accidents. These laws require drivers to purchase personal injury protection (PIP) policies that pay for a portion of their medical care and lost wages regardless of fault. Victims can still sue for crash injuries under some circumstances, though.
Reach Out to Discuss Your Case With Our Team for Free Today
The Law Offices of Wolf & Pravato offer complimentary case assessments for personal injury victims in Florida. If you have questions about your legal options, let us review your case facts. We explain your options and how we can help you seek a personal injury settlement.