Recovering lost wages after an accident or injury is not always simple.
Sure, if the person injured had regular wages for a period of time before the accident, getting lost wage verification might be all that’s required.
But, what about the self-employed, or those who just started a new business venture?
What about when insurance adjusters and their attorneys request tax records?
Proving lost wages generally requires completion of forms from an employer and doctor verifying the missed time, pre accident earnings and medical inability to work. It sounds simple. It can be, if everyone cooperates and actually pays attention when completing the verifications.
Loss of Earning Capacity
Self-employed people unable to work due to injuries face a greater challenge. If the self- employed had a record of earnings for a couple of years before the accident, then it will be less difficult to establish the amount of the loss that should be awarded.
Those involved in more recently initiated business ventures face significant challenges. Few people who start out in a garage actually become the next Microsoft. Insurance companies know that 4 out of 5 new businesses fail, so getting compensation for lost earning capacity from an insurance company after a car accident or slip and fall injury presents challenges.
Tax returns can provide a basis for wage earners and the self-employed in establishing damages. But do you really want to disclose tax returns? They often include personal information, not the least of which can be a spouse’s income, investments, charitable contributions and other highly personal data.
Federal tax code provides that tax returns “shall be confidential”. But, where the injured taxpayer raises the issue of loss of earnings, courts generally consider that confidentiality to have been waived. The idea of a ‘qualified privilege’ generally requires considerations of the taxpayer’s privacy and narrowing the information that is disclosed.
Some states provide a privilege for state tax returns. Massachusetts state tax returns are privileged, and a taxpayer cannot be compelled to produce them in discovery. This protection originated in the case of Leave v. Boston Elevated Railway.
Other courts mandate disclosure of tax returns. New Hampshire court rules require those claiming loss of earnings in a lawsuit to disclose Federal Income Tax Returns for the year of the incident, two years before, and one year after. Instead of providing actual returns,NH Superior Court Rule 37 (k) allows provision of a written authorization allowing opposing counsel to obtain the tax returns from the IRS.
How Experts Add Value
Placing a number on impaired earning capacity doesn’t require mathematical precision, but must be based on more than mere speculation. So, in cases involving significant loss of earnings, attorneys sometimes retain economic experts to provide testimony on the injured person’s vocational abilities, the market for the individual’s skills and a reasonable estimate of the loss of earnings caused by the injury.
Expert testimony makes calculating lost earnings less speculative. These and other factors are what experienced personal injury attorneys add to a case.
Mitigation of Damages and Lost Wages
Finally, the law imposes a duty on those injured in accidents to mitigate their damages. Here’s what mitigation of damages requires.
More information on personal injury here.