How are the income taxes determined when the punitive damages are included in a settlement amount and not an award? | Shapiro, Washburn & Sharp

In order to avoid paying the government more in punitive damage tax than you should, it is critical that the settlement agreement your accident attorney draws up is specific in what dollar amount – if any – is specifically dedicated for punitive damages. Otherwise, the IRS could turn around and make that determination and the amount could be much more than what was actually intended to be punitive damages.