APPLYING TAXES TO THE SETTLEMENT

Teentitan - Hence why I mentioned that I tried to use the KISS principle. Someone with allot more pocket protectors and a calculator then me needs to figure this out.

But you are right - let's see how everything else turns out before we worry about the tax man showing up!

Teentitan, thanks for keeping clarity on the site.

Cheers

Hey guys I don't want to be the party pooper here but the lawfirms tax department is all over this.

And if negotiations are still going on about taxes, and we are looking at taxes that go back 40 years trying to figure it out is like trying to pick the Lotto 6/49 numbers...practically impossible.

So until the negotiations are done and we get the facts and figures we should just let this dog lie and sleep.

This was one of the reasons I deleted a lot of posts a while back it's all speculation which just winds up everyones anxiety. Let's try to ignore this until we get the full information OK?

(One thing you forgot to add Zipper is interest owed. So without knowing how much that is your calculation is off from the start)

Sorry, comment withdrawn.

Maggie - What would have been receieved back at the end of the tax year is still less than what was paid out.

As for missing anything, I tried to keep it simple. Let the Tax Guru's sort it out.

The line item missing from this equation is the tax deduction you received for the full amount repaid. Unfortunately, in our case, this was deducted in one year not spread out over the years you received it, but you did received the deduction and therefore theoretically should have received the difference (taxes paid) back as a tax refund.

It sounds interesting and I think McInnes Cooper should have their tax lawyers look at it

This subject was mentioned a number of times throughout the forum and I have been revisiting it a bit! It is hoped that someone can correct me on it! However, if I am correct in my thinking, may mean some serious calculations for SISIP to figure out.

When SISIP paid out the LTD, the amount was taxed and the veteran received “X” amount:

Example: $1,400.00 – Tax (say $300.00) = X ($1,100.00 remaining for that month) paid to the applicant.
However when the Claw-back occurred, SISIP wanted back the total pay-out ($1,400.00), which came from the compensation amount received from DVA, which this amount is not taxed.

Therefore the veteran was out an additional $300.00 and not just the initial net amount ($1,100.00) paid by SISIP.

In a case where the veteran did not get any settlement from DVA until after the 24 months of being on SISIP LTD but back dated to before applying for LTD, would create a situation such as:
Staying with the above figures for ease of calculating:
Year 1 12 months X $1,400.00 = $16,800.00 – $3,600.00 (Taxes paid) = $13,200.00 (net income)
Year 2 12 months X $1,400.00 = $16,800.00 – $3,600.00 (Taxes paid) = $13,200.00 (net income)
Totals: $33,600.00 - $7,200.00 $26,400.00

Let’s say that Settlement from DVA provides lump sum of $39,000.00 and the claw-back happens. The veteran has to pay back the gross amount ($33,600.00) and not the net amount ($26,400.00), so he/she is now out an additional $7,200.00.

Since the DVA portion is nontaxed compensation, in the settlement, the initial principle (the $33,600.00) should not be taxed and only tax be applied to the compounded interest that has accumulated over the years.

In my case, the money owed for the 34 months that I should have been covered by SISIP LTD before obtaining gainful employment should not be taxed, which would be approximately $49,000.00 and only the compounded interest that has accumulated, which makes the full total add up to approximately $108,000.00 (as of 3rd Quarter of 2012).

$108,000.00 - $49,000.00 = $59,000.00 remaining and this is what should be taxed.

I may be well off base, but it does raise the question? Anyone care to jump in! McInnes – Cooper?