Workers Comp Considerations: Are My Benefits Taxable?

| December 28, 2015

Benjamin Franklin said, “In this world nothing can be said to be certain, except death and taxes.”

Of the two certainties, death is far simpler. While everyone must pay some taxes, calculating the amount you owe is difficult. There are many ways for people to receive money, but only some of them are considered income from a taxation perspective. Nowhere is this ambiguity more of a problem than with workers compensation benefits. Although employers pay them to their workers, they are considered compensation for injury rather than their work, making their status as income ambiguous.

 IRS Tax Form 1040

General Georgia Guidelines

Under ordinary circumstances, neither the Federal government nor the State of Georgia consider workers comp benefits to be taxable income. As long as the money you are paid falls square under a worker’s compensation law or related statute, it is not considered income in a strict sense of the term. You do not have to report it on your W2 form or other tax documents. The same is true if you receive a lump sum payment from your employer as part of a settlement; you may place that money directly in a legal tax shelter, where the IRS can’t touch it.

Back to Work Benefits

Workers comp becomes more ambiguous if you are able to return to work before you have fully recovered from your injury. As part of the restitution for the ailment, your employer may allow you to perform lighter duties while still receiving the same pay. Despite the fact that this is connected to your injury, you will still be expected to pay taxes on those wages. If you still receive workers comp benefits, however, that income will still be exempt from taxation.

Pension Particulars

Employers often include long-term benefits for injuries within their workers’ pensions. If this is the case, you will have to determine which pension payments are for your disability and which you would have received anyway. The former payments will be exempt from taxation, but you will still have to pay taxes on the latter. The same is true if your spouse receives survivor’s benefits from your pension after you die.

Social Security Specifics

If you receive Supplemental Security Income or Social Security disability payments during the period of your injury, this may complicate your tax status. You will be required to add up your Social Security payments and your workers comp benefits and pay taxes on any of the combined income above a certain threshold. Alternatively, Social Security may lower your payments to keep you below the threshold. Either way, however, you will keep less money.

Morgan & Morgan is committed to helping you get and keep every cent of workers comp that you deserve. For more information, contact us today.


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