Demystifying the Structured Settlement Payment Sale Process
One of the most common concerns that people have when they wish to sell or purchase structured settlement payments is whether they will need to pay taxes on the payments they sell, or the money they receive. It’s understandable why so many people would be worried about taxes, especially since many of those trying to sell their settlement payments are doing so because they have financial hardships they’re trying to address as soon as possible. Generally, plaintiffs are not required to pay taxes on their structured settlement payments, nor will they have tax implications if they sell them for cash.
CrowFly offers transparency in all that we do, whether it’s vetting interested investors or answering seller questions. Our professionals can help you understand how you can avoid unnecessary tax implications, though we do not give tax advice. We encourage you to consult with a financial advisor before taking action.
When Settlements Can Be Taxed
There are several specific situations where a structured settlement for personal injury claims can be taxed as income. While victims typically receive compensation for economic and non-economic damages only after winning personal injury claims, sometimes they are also awarded money to cover for punitive damages. Punitive damages are taxed as income, and any interest earned will be taxed as well.
Some structured settlements are also taxable, and those are usually for cases involving non-physical injuries, such as discrimination claims, employment claims, or sexual harassment. CrowFly does not work with taxable annuities.
CrowFly Simplifies the Process
Our knowledgeable and accessible customer service team makes it easy for you to figure out what kind of structured settlement you may have and what the tax implications could be, though we do not give tax advice. Our platform also walks users carefully through the sale process to ensure that buyers and sellers follow proper steps carefully and no mistakes are made. Our innovative process ensures that all transactions are processed securely and without errors.
Speak to a CrowFly representative today at (888) 560-6629 regarding the structured settlement payment sale process. For advice or more information on tax-related matters, contact your financial advisor or tax professional.
People who have structured settlements often gain them through civil claims such as
- Personal injury
- Medical malpractice
- Wrongful death claims
In most cases, structured settlements are tax-exempt, meaning that individuals don’t have to worry about paying taxes, regardless of whether they continue receiving payments or they sell them for a lump sum later. The reasoning for this is that settlement money is compensatory, meaning that it’s meant to compensate individuals and families for damages and losses such as wages or medical expenses. The money isn’t considered traditional income and, as a result, it is exempt from state taxes and taxes on dividends.
There are several federal laws that outline this stipulation, including:
The Internal Revenue Code, which states in Sections 130 and 104(a) that any damages received for personal injury, illness, and workers’ compensation through lawsuits or agreements are tax-free.
- The Periodic Payment Settlement Act, which was passed by Congress in 1982 to increase the use of structured settlements in personal injury lawsuits, which include wrongful death cases. Workers’ compensation cases were included in cases that received tax-free benefits in 1997.
- The Structured Settlement Protection Act of 2002, which maintains that taxes don’t have to be paid on the sum you receive from selling your payments as long as you’ve followed the required steps.
If you are interested in becoming an investor in a structured settlement payment, you need a team who knows how to help you get the best deal. That team is CrowFly. When you need to sell your structured settlement payments, you need a team who knows how to help you get the best result. That team is CrowFly.