Many of our clients are surprised when we tell them that we need copies of their tax returns in order to prepare their personal injury cases for settlement or litigation. They shouldn’t be.
Whenever a plaintiff or claimant in a personal injury case is asserting a claim for past lost wages or loss of wage earning capacity in the future, tax returns are almost always relevant and - many times - the easiest way to prove one of these claims.
Tax Returns Can Sometimes Make Proof Of Lost Wages Easier
For someone with a steady earnings history, tax returns frequently allow us to compare and contrast pre-injury earnings versus post-accident earnings. For example, if our client showed gross earnings of $40,000.00 per year on her tax returns for several years before her injury, and has only been able to earn $30,000.00 per year since her injury, it is relatively straightforward for us to demand that the defendant compensate her $10,000.00 per year for each year of reduced wages since her injury.
While tax returns are generally a useful summary of financial data, and fairly easy to dissect, tax returns are not always the best way to prove a financial loss for our clients. When our clients have a more complicated financial picture, we sometimes hire expert forensic accountants to interpret data that might not necessarily be clear on a tax return. This is frequently the case when we have clients who are self-employed or who own several businesses.
Tax Returns Can Be Used To Help Project Likely Future Earnings (Or Losses)
When it comes to proving loss of the ability to earn wages in the future, expert witnesses are sometimes required to properly prove the claim. First, a vocational specialist can be retained to determine what kinds of jobs an injured person might be suited for compared to his or her pre-injury job. The vocational specialist will then help us determine what the wage earning range is for the new, post-injury jobs. We can then compare the pre-injury wages as shown on our client’s past tax returns to the post-injury wages that are likely due to injury, disability, impairment, etc. An accountant or economist is then sometimes retained to determine whether the wages from the new vocation are likely to increase, decrease, or stay the same in the future, and also to calculate any impact that inflation might have on future wages.
Practice Tip: Supporting Medical Testimony Is Still Essential
It is also important to remember that losses shown on tax returns are not enough to prove lost wages by themselves. There still must be medical or other supporting testimony to explain exactly why the injured party’s decreased wages are connected to the injuries from the subject accident. If there is an explanation other than the injured party’s accident (i.e. layoffs, down-sizing, being fired for some non-accident-related reason), comparisons of pre-accident and post-accident tax returns probably isn’t going to make much difference.
Additionally, when our clients decide not to pursue a claim for lost wages or loss of wage earning capacity, we always take the position that our clients’ tax returns are irrelevant and should not be discoverable by the opposing insurance companies and their lawyers.
If you have questions regarding wage loss or loss of earning capacity after any Florida accident resulting in personal injuries, call Florida personal injury attorneys Kim Cullen and Robert Hemphill at 407-254-4901 or text them at 407-644-4444.
