Legal Question in Tax Law in California

Is a death benefit settlement taxable?

My husand contirbuted to a group accident policy. When he was killed on the job, the insurance company refused to pay the beneficiaries (myself & my son). The employer agreed to pay us the face value(less the interest due) of the policy since they were the policy holder. We signed a Settlement & Agreement stating that ''a purpose of the agreement is to compensate the _____(beneficiaries)for the accidnet insurance claims arising out of or related to the death of the decedent.'' The other purposes were non-financial- confidentiality, non-disparagement, & cooperation(to be sure the employer is eventually paid by the insurance carrier) The employer submitted a 1099MISC stating they paid me the full amount as ''income''. The IRS tells me they should have submitted a 1099R for death benefits since there were no punitive damages, lost wages, or court awards. I have tried for months to get the employer to correct the 1099. The employer refuses to return my calls. Is this vindictive employer going to make me lose half of what I am due? Haven't they breached our agreement? What can I do now?


Asked on 3/27/06, 5:19 pm

1 Answer from Attorneys
Donald Field Donald L. Field, Jr., Attorney at Law

Re: Is a death benefit settlement taxable?

you should consult a cpa or enrolled agent to assist you with preparing your tax return. if the 1099 is not corrected, you will need to report the error with your tax return and attach an explanation. it is still possible you will be audited, but you will be able to support your position.

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Answered on 4/01/06, 12:28 pm


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