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Lost Wages
What Are Lost Wages?
Loss of wages can be recovered in personal injury cases in California. The lost wages refer to the income you would have earned if the defendant had not committed the wrongful act(s). Back pay or back wages are sometimes referred to in labor law cases.
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California law allows for the recovery of future income losses as well. In California, such losses are known as "lost earning capacity.".
Loss of wages and loss of earning capacity are compensatory damages that a plaintiff can receive if the defendant is found to have acted negligently, recklessly, intentionally or with strict liability.
Lost Wages
According to California law, a plaintiff's lost wages include all the money he or she would have earned from work had the plaintiff not been injured. Among the lost wages are regular pay (hourly or salary), overtime pay, commissions, bonuses, self-employment income, vacations, personal days and free meals, as well as lost perks or benefits (such as a car allowance).
Lost wages V. Lost Earning Capacity
In most cases, a personal injury results in the loss of past income. An out-of-pocket loss is a plaintiff's out-of-pocket loss up until the date of settlement or trial. Due to an injury or accident, plaintiffs are also allowed to sue for income they will not be able to earn in the future. Loss of earning capacity is commonly referred to as "lost earning capacity" in California.
The process of demonstrating lost earning capacity may be more complex than proving lost wages. To address raises, bonuses, and career development, it is often necessary to obtain testimony from a medical and/or occupational expert.
Statute of Limitations
A personal injury case in California must be filed before the statute of limitations has expired. However, statutes of limitations may apply to some injuries that are longer or shorter. For example, medical malpractice claims have a one-year statute of limitations. Loss of earnings in California can be claimed for as long as a potential plaintiff is eligible to sue.
Calculations of Lost Wages
In California, a personal injury plaintiff must prove that they have lost wages due to their injury. The calculation is relatively straightforward for an injury that lasts a short, fixed period of time. A forensic accounting or occupational expert may be necessary if the plaintiff is due a raise based on performance. Besides prejudgment interest on lost wages of any kind, juries can also award interest on any other damages.
Taxation of Lost Wages
According to California law, lost wages associated with a personal injury case are taxable.
Under Internal Revenue Code section 104, gross income for tax purposes excludes compensation for lost wages as a result of personal injuries or illnesses. Courts have generally held that this excludes punitive damages as well. A California personal injury lawsuit can recover the lost income that would have been taxable if earned.
Generally, however, California personal injury settlements are lump sum settlements that do not account for lost wages or physical injuries. As a result, determining whether or how much taxes are owed can be challenging. To determine what, if any, portion of California personal injury settlements is taxable, it is recommended that you consult a tax professional.
Proving Lost Wages
The state of California does not have a single method for proving lost wages. "Lost wages letters" from California employers are some of the most common. It is most straightforward to prove lost wages if the plaintiff has regular employment with a combination of past pay stubs and a letter from his or her employer.
An employer should include the following information in a "lost wage" letter: The employee's job title. When the employee was hired. Verification that the employee is (or was) an employee on the date of the injury or accident. Average weekly hours of work (or worked). Regular rate and frequency of pay of an employee (for instance, $25/hour). The number of overtime hours an employee normally works per week and any overtime rate which an employee is entitled to. An employee's time away from work (including medical appointments, physical therapy, etc.). The employee's sick days and vacation days. Overtime pay, commissions, or bonuses the employee could reasonably expect to receive during that period. The employee could have received any other benefits to which they were entitled, but never did (such as a car allowance).
Paystubs and Tax Returns
A letter from an employer can sometimes be hard to come by for an employee. Self-employed individuals or those with irregular income may also have difficulties obtaining a letter. The plaintiff may be able to prove lost wages through other means, such as past pay stubs and income tax returns. The Internal Revenue Service provides taxpayers with copies of their past tax returns using IRS Form 4506. From the California Franchise Tax Board, they can obtain copies of past California tax returns using California Form FTB 3516. A California personal injury attorney can obtain copies of pay stubs if the plaintiff has not kept copies during the discovery process.
Self-Employment Loss
In California, the plaintiff must prove how much he or she would have made if he or she had been able to work during the period in question. In addition to tax return statements from prior years, billing statements for months preceding the injury or accident, or, if the income is seasonal, billing statements from the same period during previous years, can establish lost self-employment income. A forensic accounting expert witness may be required if the plaintiff's income is very high or complicated. I have access to a variety of experienced forensic accounting experts.
Lost Personal Days, Sick Days And Vacation Time
When an employee uses personal days or sick days to cover missed workdays and/or doctor/therapy appointments, these days can be claimed as lost wages. The plaintiff would have been able to utilize these days whenever he or she wanted, but for the defendant's wrongful act. There was even a possibility that the plaintiff could cash them out, depending on the employer's policy. When proving lost wages due to an accident or injury, the plaintiff must prove it was lost as a result of the accident or injury.
Lost Overtime, Commissions, Or Bonuses
The state of California allows you to claim lost wages for overtime pay, commissions, bonuses, and other benefits. An employer letter stating the amount the plaintiff would have been expected to receive; and Proof that any conditions for earning the extra income were satisfied. Some methods to prove the speculative income include (but are not limited to): Past pay stubs showing overtime pay or bonuses; A written employment contract; Proof of an employer's policies regarding such income; and Sources of extra income.
Lost of Income Tips
Losing tips is more challenging to prove than wage and overtime loss, but it is possible.
Loss of tips may be demonstrated (among other ways) by an employer's letter indicating how much the plaintiff could have expected to earn; regular bank deposits on payday; prior tax returns; or reports from a private investigator's visit to the plaintiff's workplace.
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In theory, proving income that was not reported to the IRS or California Franchise Tax Board could expose a plaintiff to a claim for back taxes. It is recommended that plaintiffs in this situation consult with a certified public accountant.
Recovering Unemployment Insurance Benefits
California unemployment benefits are available to employees who are physically able to work, are available and actively seeking employment.
A person claiming lost wages was unable to work in the past. As a result, the individual would be expected to claim California disability benefits rather than unemployment benefits. An unemployed individual may be able to claim lost unemployment benefits in a California injury case if, for instance, his inability to work affected his ability to earn enough base wages for future unemployment benefits.
Special Rules In Employment-Related Cases
Workers' compensation laws in California may limit the recovery available to a plaintiff who was injured at work. In the event that a self-employed accident victim has lost wages, prior tax returns, 1099s, invoices, bank statements, contracts, or statements from current clients can be used to demonstrate their loss. They can provide information on the amount of lost income due to the accident. Unreported income can be difficult to recover if not documented on these documents.
Proving Self-Employed Losses
When self-employed individuals are injured in a car accident, they have additional difficulties proving the wages they lost because of the accident. There are several types of documents that can be used as evidence of lost income from missed work, depending on the circumstances, including tax returns from previous years, 1099 tax forms from clients, current, past, or outstanding business invoices, bank statements, online transactions, deposited checks, client contracts with payment terms, and sworn statements from clients.
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Documentation is required to demonstrate how much the victim would have made if not for the injury. These documents can also serve as a method of establishing what a self-employed victim would have expected to make in the future in terms of lost earnings capacity. Lots of times, the self-employed victim's lost wages are substantiated by the combination of these documents. A victim who keeps meticulous records tends to succeed more than one who doesn't. Independent workers who have a well-documented income are often able to present strong cases for lost income compensation without having to turn to client testimony, which can be awkward.
When filing a personal injury claim, the victim is responsible for proving lost wages. A strong record of income is important. Loss of wages generally needs to be proven with a reasonable degree of certainty by the victim. Since small businesses and sole proprietors are required to prove economic losses, this burden is significantly heavier on them than on traditional workers. A pay stub for a traditional worker who earns an hourly salary or has a set work schedule typically reflects the lost earnings.
Even if it takes expert testimony from an economist to prove that the worker would have earned more had the accident not occurred, a car accident lawyer can help freelancers and other self-employed workers to prove their lost wages.
Earning Income Under the Table
A personal injury claim after an auto accident cannot recover income earned "under the table." By definition, this income is difficult to trace. As a result, it is extremely difficult to establish the victim has earned it with certainty. It is also possible to incur legal problems if you pursue compensation for income earned by you but not reported on your taxes.
The Internal Revenue Service (IRS) is being told that income was earned but not reported by claiming this compensation. Tax evasion can result in tax liability and may even constitute a crime.
Lost Income Definition
Lost wages aren't the only source of lost income. It is often due to the fact that self-employed individuals rarely receive any other types of financial benefits. As a result, the self-employed may be able to recover compensation for additional types of income that are directly related to their business venture, which is not available to other employees.
The full amount of lost wages can be recovered by car accident victims. Regular pay includes: hourly or salary pay, overtime pay, bonuses, commissions, vacation, personal days, sick leave, and other lost benefits, such as free meals, vehicle reimbursement, or a per diem.
Self-employed individuals, independent contractors, and freelancers may not be eligible for these benefits or other forms of income. Although self-employed people earn additional income, other workers do not. A victim's injuries may prevent him or her from completing projects with deadlines set in a binding contract for work, potentially resulting in lost business opportunities and lost client goodwill.
However, these additional revenue sources can also be considered speculative. You can prove them with a reasonable degree of certainty with the help of a reputable personal injury lawyer.