Tax Aspects to Lawsuits, Awards, and Settlements
Author: Susan Harper
| CPE Credit: |
2 hours for CPAs
2 hours Federal Tax Related for EAs and OTRPs
2 hours Federal Tax Law for CTEC |
Lawsuits and settlements can create complex tax implications that, if misunderstood, lead to costly mistakes and IRS penalties. With millions of cases filed annually in the U.S., professionals must understand how to properly handle the tax treatment of awards and settlements.
Join Susan Harper, a former IRS agent with decades of experience, for an engaging and practical session that covers compensatory vs. punitive damages, physical injury vs. physical sickness, and non-physical injury cases such as emotional distress. You’ll also learn how to report taxable amounts, deduct legal fees correctly, and anticipate IRS examination issues.
This course provides actionable insights and real-world examples to help you navigate complex tax rules confidently and protect your clients from compliance risks.
Per the IRS Education Provider Standards this course must be COMPLETED by 12/31/2029 to receive credits. NOTE: Go to My Professional Profile in your CCH CPELink account settings to ensure your name, and PTIN number; matches your PTIN card
Publication Date: March 2026
Topics Covered
- Terminology and Key Definitions
- Tax Treatment of Awards & Settlements
- Payroll & Self-Employment Considerations
- Attorney Fees
- Accrued Interest in Judgments
- IRS Examination Issues
- Information Reporting Requirements (1099s)
- Litigated Case Discussions
Learning Objectives
- Determine when a lawsuit, award, or settlement is taxable
- Differentiate between compensatory and punitive damages and allocate properly
- Identify distinctions between physical injury and physical sickness cases
- Identify non-physical injury cases, including emotional distress
- Recognize how to properly report taxable amounts received (not net of legal fees)
- Evaluate deductibility of legal fees under current tax law
- Recognize how to anticipate examination issues by IRS auditors
- Recognize consequences for incorrect reporting and associated IRS penalties
Level
Basic
Instructional Method
Self-Study
NASBA Field of Study
Taxes (2 hours)
Program Prerequisites
None
Advance Preparation
None
