When filing for a worker’s compensation claim, we know that you have plenty of questions. From getting proper treatment, to getting proper compensation, and keeping your job intact after such a difficult time. In short, there’s a lot, both mentally and physically, that goes into a worker’s compensation claim on both sides of it. But, one question you might not have considered until the end of the year, is pretty important to know. When it comes to taxing worker’s compensation benefits, what’s the deal? Do I pay them? Is this income tax-free? What do I do in this situation? Lucky for you, we have answers…
Taxing Worker’s Compensation Benefits: What’s the deal?
When it comes to taxing worker’s compensation benefits, it rarely takes place. In fact, neither state nor federal levels will tax this wage. In most cases, this income is fully exempt form taxes. But, not in all cases. There are some exceptions to this rule.
When might my worker’s comp wages be taxable?
If you are receiving supplemental security income, you may need to pay taxes on that income. To put it simply, your supplemental security income will be lower. Then, worker’s compensation will make up the difference, therefore allowing for the payments to become taxable.
You might not think you’d be able to receive both incomes at the same time, however there are certain situaitions were both benefits are available to you. For instance, if your injury does not improve. In this case, you are considerably disabled, which allows disability insurance and worker’s comp benefits at the same time. While this is ideal for someone who is permanently impaired, it also allows for the incomes to be taxed. So, it is a give and take.
Knowing the numbers
Coming to understand these numbers, guidelines, and familiarizing yourself with these tax brackets will help you to make sure you are hitting your marks, and making the most of your current situation. For instance, the worker’s compensation amount might be too small to be taxable. Furthermore, each tax bracket offers a different amount of money depending on how you file.
Whether single or married, there are several amounts that may determine whether your worker’s comp is taxable. If half of your payments total one of those amounts, your benefits will be taxable. So, as you can see, when it comes to taxing worker’s compensation benefits, there’s a lot of factors that can influence it. So, speak with a tax expert before filing. After all, you don’t want to have to deal with the IRS on top of a work injury.