IRS Foreign Account Voluntary Disclosure Program Extended

IRS Issues New Rules For Tax-Free Legal Settlements

(Forbes) Which personal injury recoveries are tax-free? For almost 80 years, Section 104 of the tax code has made many injury recoveries tax-free, whether you settle or go to court. Up until 1996, just about anything qualified, including emotional distress, defamation or invasion of privacy. See Don’t Fail To Consider Taxes When Settling Litigation.

But in 1996, the tax code was changed to say only recoveries for physical injuries or physical sickness qualify. Since then, there’s been no end of litigation about the scope of this tax exclusion and just how “physical” injuries must be to count. Headaches and insomnia? Not enough. Ditto for stomachaches. See IRS To Collect on Italian Cruise Ship Settlements.

The IRS hasn’t issued a formal interpretation of the “physical” modifier but routinely argues in audits and tax cases that there must be “observable bodily harm”–think bruises or broken bones. But many injuries are internal and much physical sickness can’t be observed with the naked eye. See Are PTSD Recoveries Tax Free?

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Robert W. Wood practices law with Wood LLP, in San Francisco.  The author of more than 30 books, including Taxation of Damage Awards & Settlement Payments (4th Ed. 2009 with 2012 Supplement, Tax Institute), he can be reached at Wood@WoodLLP.com.  This discussion is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.

Mitt Romney Tax: Robert Wood

Republican presidential candidate Mitt Romney released tax records on Tuesday indicating he will pay $6.2 million in taxes on a total of $42.5 million in income over the years 2010 and 2011.

Bowing to increasing political pressure to provide more detail about his vast wealth, the former private equity executive released tax returns indicating he and his wife, Ann, paid an effective tax rate of 13.9 percent in 2010. They expect to pay a 15.4 percent rate when they file their returns for 2011.

Romney's tax rate is below that of most wage-earning Americans because most of his income, as outlined in more than 500 pages of tax documents, flows from capital gains on investments.

Under the U.S. tax code, capital gains are taxed at 15 percent, compared with a top tax rate of 35 percent for wage earners.

The Tax Lawyer Robert Wood discusses the concept of carried interest.

Amazon Changes Tune on Internet Sales Tax: Robert Wood Fox Business

Buffet Rule, AMT And Other Tax Questions: Tax Lawyer Robert Wood San Francisco California

The Tax Lawyer Robert Wood...Wood LLP in San Francisco

Warren Buffett likes talking tax and knows a lot about becoming wealthy.  But many are wondering if he should stay in Omaha, perhaps even take up peddling mail-order steaks.  His Buffett Rule may be attractive to President Obama and to low income earners who've never heard of the alternative minimum tax—otherwise known as AMT.  Tax me more is also a nice sound bite.

But even if a tax increase is a good idea, many others are wondering whether the Buffett Rule is a good way to do it.

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