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<<My questions are these:
1. What are the tax implications of a settlement?
2. Does how the funds get earmarked (lost wages, med expenses, pain and suffering, etc.) make
any difference in the tax implications?>>

Ron...

KAT gave you a great answer...and I certainly agree with all of it...especially the suggestion to seek professional, qualified tax advice. With the sums of money that you are dealing with, it is important that things are done correctly.

One other thing...you might want to open this discussion with your attorney. When your attorney (or the auto insurance company attorney) negotiates the settlement, it is generally done in a structured environment (so much for punitive, so much for medical reimbursement, so much for lost wages, etc.). So from the settlement, you should get a pretty good idea of where everything stands. And then you can take THAT information to your tax pro and discuss the tax impact to you.

TMF Taxes
Roy
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