Do I have to pay taxes on settlement money from personal injury accident?

14 What about emotional distress? My settlement included some money for that. Is that part taxable?

8 If the emotional distress is directly tied to your physical injuries, then it's generally not taxable. The IRS views it as part of the personal physical injury settlement. However, if the emotional distress is not related to physical injuries (like in employment discrimination cases), it would be taxable. In your case, since you mentioned being hit by a truck, any emotional distress compensation would likely be considered part of the overall physical injury settlement and therefore not taxable.

12 Wait how does it actually work? Do you just upload the settlement documents and it tells you what's taxable? Does it generate some kind of form you can use for filing?

17 Sounds interesting but how accurate is it? Settlement tax issues can be complex and I'd be worried about trusting an AI with something that could potentially trigger an audit.

6 The process is really straightforward - you just upload your settlement documents and it uses AI to analyze the language and categorize different portions of your settlement. It clearly identifies which parts are taxable and which aren't based on current tax law. It doesn't generate tax forms directly, but it does create a detailed report you can provide to your tax preparer or use as a reference when filing yourself. The report breaks down each component of your settlement with citations to relevant tax codes. As for accuracy, I was initially skeptical too, but it cites specific IRS publications and tax code sections for each determination. I had my accountant review the analysis and he confirmed it was correct. The tool is actually developed by tax professionals who train the AI on thousands of real settlement cases and IRS rulings.

3 How does this even work? The IRS phone system is notoriously awful. Is this service somehow jumping the queue or what?

5 Yeah right. Nothing can get you through to the IRS faster. I've tried everything and always end up waiting hours or getting disconnected. Sounds like BS marketing to me.

9 It uses a system that continuously redials and navigates the IRS phone tree until it gets a spot in line, then it calls you when an agent is about to be available. It's not skipping the line - it's just handling all the tedious redialing and menu navigation for you. I was skeptical at first too because I've tried calling dozens of times over the years and either get disconnected or have to set aside half a day. But it actually works - their system keeps trying until it gets through, then alerts you when you're about to be connected.

1 How long do you actually need to keep settlement documents? Is 7 years standard or should I be keeping this stuff even longer?

11 You should keep settlement documents indefinitely, honestly. The standard recommendation for most tax documents is 7 years, but for something like a settlement that could be questioned many years later, I wouldn't risk discarding them. The IRS generally has 3 years to audit your return, but this extends to 6 years if they suspect you underreported income by more than 25%. And there's no statute of limitations at all if they suspect fraud. Since a settlement can be a large sum that might look like "missing income" during automated reviews, having your documentation ready even 10-15 years later could save you a massive headache.

19 This is super important! I work at an accounting firm and see this mistake constantly. Personal injury settlements are only tax-free for compensatory damages (medical bills, pain/suffering, etc). Punitive damages are 100% taxable, and sometimes they're not clearly separated in settlement paperwork.