Car accidents — Damages –Unreported income

If you are injured in a car accident then you are entitled to recover in a lawsuit not only for your injuries and property damage, but also for your economic loss of lost wages and earnings.

Your personal injury lawyer can prove loss of income from a paycheck relatively easily. However, if there is income that has not been reported to the IRS, then it can be awkward for your lawyer to show the lost earnings. You do not want to admit under oath to not filing or reporting income to the Internal Revenue Service. On the other hand, you don’t want to lie.

Non-reported income for a deceased person

If the car accident resulted in death then the deceased person is beyond the prosecutorial arm of the IRS. Still, your personal injury lawyer may want to check whether or not the surviving spouse signed the tax returns and is subject to penalties.

If there is no risk of prosecution to the family, your lawyer may consider making an argument to the jury about the loss of lifestyle. The following types of questions to the surviving family members can demonstrate this:

  • What was your annual rental or mortgage payment?
  • Did the decedent make these payments?
  • Did your family incur tuition expenses?
  • Did the decedent make these payments?
  • Did the family go on a vacation this year?
  • What was the cost of the vacation?
  • Did the decedent pay for this expense?
  • Was it an annual item?

Non-reported income for a living person

The problem can actually be easier if the person with the non-reported income is alive. There is no reason to forego a major element of damages because of a mere “bookkeeping” oversight. The solution is to amend the old tax returns. That will make everyone happy. The IRS accepts and welcomes amended tax returns, and always accepts late returns.

There will be interest and steep penalties, but amending the return is well worth it to be able to seek full recovery in your lawsuit for your rightful economic loss from the car accident.