Car Accident Work Loss Income

[stalker001]

I have a client who received some income resulted from a car accident from an insurance company. There are two types of payments she received:medical expense reimbursement and work loss income. Based on my research I do not believe I have to include medical expense reimbursements on her 1040, but believe need to include the work loss income. Could someone please provide with some insight or direction on how to approach this? Also, if the work loss income is taxable, would it be subject to self-employment tax? (she was self-employed). Thank you so much!

[ChEAr$]

I have a client who received some income resulted from a car accident from an insurance company. There are two types of payments she received:medical expense reimbursement and work loss income. Based on my research I do not believe I have to include medical expense reimbursements on her 1040, but believe need to include the work loss income. Could someone please provide with some insight or direction on how to approach this? Also, if the work loss income is taxable, would it be subject to self-employment tax? (she was self-employed). Thank you so much!

Agree with your conclusions with one caveat.

If reimbursements for medical expenses were for some amounts already itemized on schedule a, there could be other income for line 21.
But only to the extent reimbursements saved tax dollars.

[MilTaxEA]

Agree with your conclusions with one caveat.

If reimbursements for medical expenses were for some amounts already itemized on schedule a, there could be other income for line 21.
But only to the extent reimbursements saved tax dollars.

A different conclusion was reached in this same discussion on TaxAlmanac based on Rev Rul 85-97.

[ChEAr$]

A different conclusion was reached in this same discussion on TaxAlmanac based on Rev Rul 85-97.

which dealt with loss of wages, as opposed to this case, loss of self employment income. It's possible there might be a subtle difference between what that Rev Rul speaks of and the case instant.