Nobody wants to have to bear the double burden of struggling to make ends meet while suffering from a debilitating injury and having to worry about the tax burden you might be undertaking by accepting workers’ comp benefits.
The good news is that while there are some specific instances when your benefits can be partially taxable, the vast majority of people never end up having to pay taxes on their workers’ compensation checks. Learn why most people don’t have to pay taxes on workers’ compensation benefits, and when to call on the services of a workers’ comp attorney.
Workers’ Compensation and Taxes
Workers’ compensation, for the most part, is simply not taxable. The government is well aware that most workers’ comp benefits are meant to compensate you for medical bills, which doesn’t count as income, and that the part which does count as income caps at far less than your regular income. This reduction in amount makes it not taxable in the eyes of the IRS.
When Workers’ Comp Is Taxable
There is a single circumstance when your workers’ compensation may be taxable. If you are receiving both workers’ comp and Social Security Disability, and the two combine to total more than 80 percent of your standard average weekly salary (as of the time you got hurt), then the SSDI you receive will be reduced to that maximum cap. Likewise, the workers’ compensation you receive will now be subject to taxable status but only for the same amount by which your SSDI was reduced.
For example, let’s say that 80 percent of your monthly salary comes out to be $2,000. The combined total of your SSDI and workers’ comp totals $2,100. Your SSDI will be reduced by $100, and $100 of your workers’ comp will now be taxable income.
The Tax Threshold
However, even when you’re facing the 80 percent rule, you may not be subject to taxes. You must also meet a certain tax threshold for total annual income before you have to pay taxes at all. Thus, if your total annual income counting only half of your Social Security income is $25,000 for an individual, or $32,000 for a married couple, or less, you won’t be liable for taxes.
This has the effect of ensuring that the vast majority of people who are on disability and on workers’ comp will not have to pay taxes at all.
Workers’ Comp Attorney
There are a lot of complex issues that play into workers’ compensation claims. Many people find that their application is denied for one reason or another, and need help to challenge and appeal the denial. Doing so can lead to a complex fight for the benefits you deserve. When this occurs, you need the help of a qualified and experienced workers’ comp lawyer.
For many years, Andy Citrin Injury Attorneys have been here to guide people through the process of applying for and acquiring workers’ compensation benefits when they’re hurt on the job. We’re also ready to help you. If you need advice, help filing, or representation during an appeal, contact us and let’s consult about your legal needs today.