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Why Personal Injury & Taxation Aren’t That Different…

Just like learning more about your Canadian taxes, we all need to understand about what to do when we get into an accident. If you think about it, taxes and injuries are quite similar. They are both things that we have to think about but most of don’t really like to. Even if you work in a fairly safe environment, you still need to be aware of your rights in the case of an injury or accident. In some ways, individuals who work in a dangerous environment typically have a greater awareness of safety precautions and their rights. Many of these individuals go through detailed health and safety education and may even have special insurance arranged by their employers. The average employee or retired worker doesn’t typically get this background and this is where learning more about personal injury can be useful for you. Let’s discuss a bit more about personal injury and when it may apply to you…

What is Personal Injury Law?

In Canada, personal injury law encompasses all types of physical and psychological injuries. This includes injuries that may arise from motor vehicle accidents, occupier's liability claims, as well as public liability claims, negligence of school boards, public transportation and recreational facilities, product liability claims, catastrophic loss claims such as accidents resulting in paraplegia. The concept of personal injury law is also heavily related to malpractice and tort law.

A tort refers to a body of the law which allows an injured person to obtain compensation from the person who caused the injury. The primary aim of tort law is to provide relief for damages incurred and deter others from committing the same harms. The types of damages the injured party may recover according to tort law are loss of earning capacity, pain and suffering, reasonable medical expenses, including present and future expected losses. The focus of tort law typically centres on determining when the person who causes the harm must pay compensation to the person who suffered it. This is dependent upon the nature of the conduct of the person, who caused the harm, the nature of the harm and the circumstances in which the harm was inflicted.

Do I Need a Personal Injury Lawyer?

Studies have shown that approximately 60% of accident victims settle with the insurance company without using a personal injury lawyer. That being said, as you do when you look for advice with your taxes, getting advice from a personal injury lawyer can be useful so you can ensure you are getting what you’re rightly owed. In making the decision to engage a lawyer you need to understand if the insurance company will be saving you in legal fees or if you are losing money by settling for less than you may have to.

Personal injury lawyers can also assist you in meeting with the Insurance Company, getting your expenses paid upfront and in settling your claims quicker. You can usually engage a personal injury lawyer to give you an opinion as to what the claim is worth and to provide you with an outline of the steps you should take to negotiate a fair settlement. This will typically result in a fairly cost effective solution for you and help you maximize your settlement.

Personal Injury Law & Taxation – similarities?

On the surface, both of these topics may seem completely dissimilar. However, just like your approach with your taxes you need to take a number of similar steps when it comes to addressing any personal injury claims.

First of all, you need to take careful notes. Just like you would with logging any deductions for your taxes, you need to be very detail oriented. If you are planning on filing a personal injury claim, you need to document all injuries as soon as you are able and keep documenting them throughout the course of your claim. Many plaintiffs fail to properly document their injuries initially or continuously throughout the term of their disabilities and injuries. Start off when you are able to keep a diary of all problems that you encounter as result of the accident. This should include the types, frequency, locations and duration of pain and other injuries. Many suggest ranking your pain on a scale of 1-10 try to document how the injury has changed, if at all from the time of the initial injury as you proceed over the course of time.

As stated before, retaining an experienced professional is also heavily advised when it comes to personal injuries. Like you should do when you start up a new business or in taking on a new tax situation, try to hire a good lawyer as soon as possible. You should find a lawyer who devotes the majority of his practice to personal injury cases. This is not only a lawyer who advertises for personal injury cases, but also has the skill and experience to tackle and provide a wealth of experience in terms of interpreting and deciding on courses of action for the treatment, resolution and documenting of the injuries. Just like in taxation, there are some professionals who spend large amounts of money advertising to steer respective clients to their door. However, they may not do much once you enter the door other than trying to finalize your taxes quickly which doesn’t help you maximize your tax efficiency. A good indication of an experienced lawyer is whether or not he or she is a member of any Canadian associations. People that belong to these organizations tend to be well trained, efficient and dedicated in handling a personal injury case.

Finally, you need to adopt a similar approach when it comes to personal injury law as you would with your taxes. You should make an ongoing commitment to record all expenses and keeping receipts. If you intend to recover funds laid out and expended for prescriptions, operations and other expenses associated with your injury, you will have to keep some form of receipt or invoice to show that these amounts have been paid by you.

Are there any tax implications with regards to personal injury?

It is important to know that The Canada Revenue Agency (CRA) maintains that all personal injury damages are exempt from income tax. Although the CRA has faced a number of questions on this position it has provided little explanation for its position. Many suggest that the CRA’s practice of not including such receipts in income makes it unlikely that Canadian courts will have the opportunity to fully consider the proper legal treatment of personal injury damages.

Many suggest that personal injury damages for loss of working capacity should be fully taxed, since they are best viewed as replacing capital assets with low basis. It is also shown that horizontal and vertical equity may be better achieved if damages for cost of care are fully taxed, given the existing medical expense tax credit. The issue many have with this is that it sends a message out that if you are obtaining personal injury funds – following an accident – it gives you a tax-free option for obtaining income. As you can imagine, this point of view can be debated on both sides and will likely be a leading discussion amongst the Canadian public and government for decades to come.

Overall, take the time to learn more about personal injury in case you ever need to take action after an accident. You should be taking the same professional approach as you do with taxation and getting professional advice can be a strong step in the right direction.

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