by saintvee1964 » Tue Feb 01, 2011 09:24 pm
I live in Florida. In 2008 my vehicle was "totaled" and my insurance company cut a check minus deductible. Last year 2010, I received notice from the IRS that I owe taxes on the amount the insurance company paid for the vehicle. How could this be? I had a total loss, no gain.
Posted: Wed Feb 02, 2011 06:02 am Post Subject:
the only part of an auto insurance claim that would be taxable is if punitive damages were awarded. since that doesn't apply here, my guess is that your check in 08' was greater than 10K, and you deposited the check into a personal account. 10K happens to be the threshold that sets off an IRS red flag, for checks deposited into personal accounts.
No biggie! once you let the IRS know that the check was for property damage and not punitive damages, you should be cleared.
Posted: Wed Feb 02, 2011 09:15 am Post Subject:
I received notice from the IRS that I owe taxes
This should not be the case with an insurance property settlement. You pay premiums with AFTER-TAX dollars, and claims are not taxable as income. Make an appointment with your local IRS office and talk to someone face-to-face about the situation.
Posted: Thu Feb 03, 2011 07:00 am Post Subject:
True. Settlements are meant to compensate for your loss. They can't be considered at par with your earned income. Consult your tax advisor or preparer. I guess, I'd read some where, that certain claims which are paid in connection with future income losses are considered to be 'taxable'.
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