If you are collecting workers compensation benefits, you may be wondering if you need to pay taxes on that money.
If you are collecting workers compensation benefits due to an accident at work, you might be wondering if you should be saving up money to pay taxes on the money you receive. The good news is that most workers’ compensation benefits are not taxable at either the federal or the state level. But, that doesn’t mean that you won’t have to pay taxes. You might be taxed on things like Supplemental Security Income or Social Security Disability Insurance, which you might also be collecting.
There are many types of nontaxable income that people can receive in addition to workers’ compensation, some of these include:
- Compensatory damages from sickness or physical injuries
- Compensation resulting from permanent loss of daily life activity capability or disfigurement
- Disability benefits that are due to a “no fault” car insurance policy like earning capacity and loss income
- Payments for welfare programs
In general, workers compensation benefits are not taxable as federal income. Since it is an award made to a worker who has been injured on the job or from a work-related illness, it is completely exempt from being taxed. If you are receiving payments due to survivors benefits the same is true.
If you are also receiving money from the federal government for social security disability or supplemental security income, then those payments may be taxable, and you might end up owing money to the government depending on your income level. In most instances, the amount received is less than the amount that would require you to pay taxes based on income.
If you receive benefits due to a lawsuit and the court approves a specific settlement, that money is taxable. But a St Louis work comp attorney will be able to structure the payments so that they will minimize being taxed heavily. Spreading out the payments in the proper way will negate you from having to pay any taxes on the money you receive. You may also be taxed if you decide that, while you are receiving workers’ compensation benefits, you also wish to retire.
Workers Compensation and Social Security Together
You are only allowed to receive a maximum amount when you add the SSI together with workers’ compensation. The amount of workers’ compensation you receive will have a direct relation to how much social security you are entitled to, and, the social security benefits you receive will be taxable. Depending on the amount you are awarded you will fall into a specific tax bracket, and your taxable income will be calculated.
If you are unsure about what income you receive from either governmental programs or through workers’ compensation benefits are taxable, it is a good idea to consult a St. Louis workers’ compensation attorney.
They can help you to schedule payments or put money away so that when taxes come due, you have the money to pay and don’t incur any penalties. Assuming that the money you receive from the government or any worker’s compensation benefits isn’t taxable can land you in a whole lot of trouble around tax time if you aren’t careful and don’t consult a St. Louis workers’ compensation attorney to ensure that you know the specifics about how to file your taxes.
St. Louis Workmens Comp Attorney
If you have questions about your workers compensation benefits, cal the Law Office of James M. Hoffmann at (314) 361-4300. For more than 20 years, we have been helping injured workers get their maximum workmens compensation benefits. You can also fill out our online contact form to request a free consultation.