Can the IRS levy/seize funds received from a state victim of violent crimes compensation program

I guess it depends; this is a legal issue; basically, if you receive a settlement / verdict award deemed as compensation for physical injury / illness that money is not subject to federal income tax. Regardless of whether the compensation was received via a court-ordered award or a settlement that was negotiated out of court. It makes no difference if the compensation is in a lump sum or spread out through multiple installments. compensation that you receive for medical expenses is also considered tax-free. However, if you claim a medical expense deduction on SCh A of 1040 or on your state return for medical costs that are later reimbursed in a personal injury award, then the deducted amount must be reported as income on your tax return.Compensation for lost wages, interestingly enough, is also considered non-taxable, despite the fact that those wages would have been subject to income tax if they had been earned through the course of employment. But if any of the compensation is considered interest for the delay between the victim’s injuries and the time that they receive compensation, then that portion is considered taxable.Aslongas you are a tort plaintiff , then , you may recover damages for personal physical injuries tax-free; however, the tax consequences for the crime victim recovering victim compensation can be different; the recoveries of both the tort plaintiff and the crime victim are compensation for personal physical injuries, but differ slightly in that the tort plaintiff receives damages in a civil action, whereas you, as the crime victim, receive victim compensation in a criminal proceeding. Nonetheless, this subtle difference between an award in civil court versus one in criminal court may be the underlying basis for taxing one but not the other.You can exclude personal physical injury recoveries. from gross income.this means that civil damages recovered by the tort plaintiff may be excluded from income. The tax law, however, is less established on the taxation of crime victim compensation; The Crime Victims’Compensation Program is administered by the Office of the Attorney General of your state .I guess you need some legal help from a tax attorney for your fed/state taxes.