Are workers’ comp benefits taxable? At Ramos & Law, we hear this question all the time come April. Under section 104 of the IRS code, workers’ compensation payments or proceeds from a personal injury recovery are not taxable. Unfortunately, certain Social Security benefits may be subjected to tax liability. A Georgia workers’ compensation lawyer may be able to help you structure your settlement to reduce your offset and lower your total taxable income. Additionally, the waiver or release of any other rights (such as the waiver of confidentiality) outside of the workers’ compensation or personal injury realm may be taxable.
Hence, it would be wise to contact the workers’ comp law firm of Ramos & Law to discuss your rights.
Workers’ Compensation in Georgia
Workers’ compensation helps recover from injuries or illnesses you incur on the job. Generally, it is paid for through a workers’ compensation insurance policy held by your employer.
Workers’ comp should pay for your past and future medical bills related to your accident, including the cost of diagnostics testing, prescriptions, treatments, and therapies that you may require. In addition to medical coverage, workers’ comp also helps reimburse you for lost or decreased wages from your time taken off work to heal, as well as future reduced wages due to your injury. If you cannot return to work in your fullest capacity for some time because of the accident, workers’ comp benefits can help you bridge the distance between your former capacity and your new levels of ability. In more extreme cases, workers’ comp in Georgia can also provide death benefits and other costs to your family.
If you have questions about your workers’ compensation benefits, reach out to a workers’ comp lawyer.
Does Workers’ Comp Count as Income?
Section 104 of IRS Code 26 U.S. Code § 104 excludes workers’ compensation from gross income accounting. Under Georgia and federal law, workers’ comp does not count as income when filing taxes. There are, however, additional rules about claiming deductions allowed under section 213 (relating to medical expenses) for any prior taxable year that can create tax liability from your settlement.
Is Workers’ Comp Taxable in Georgia?
Workers’ comp covers more than just your missing wages. Because of how many different kinds of payments and benefits it covers, the IRS does not classify workers’ comp proceeds as taxable income. Under Georgia state law, workers’ compensation is also not considered taxable income nor subject to state taxes. States must follow federal guidance on workers’ comp benefits, and you should not have to declare your workers’ compensation on your state tax filing as income unless you have claimed a workers’ compensation offset with your disability payments.
Ask an Atlanta workers’ compensation lawyer for help not only with filing for benefits but also ensuring that your settlement helps reduce your tax liability as much as possible when it includes other kinds of compensation.
When Is Workers’ Comp Taxable?
Many injured workers turn to federal disability payments, as well as workers’ comp, in order to bridge the gap of lost wages. In some cases, workers’ comp payments and public disability benefits may affect both your eligibility for SSDI benefits and your taxable income.
If you are also receiving disability benefits through Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI), you may need to pay taxes. In some cases, the Social Security Administration applies a workers’ compensation offset. The offset is a lowering of your benefits so that your combined payment (of both Social Security and workers’ compensation) stays below a certain amount. In this case, the amount that Social Security reduces your disability payments by will equal the taxable amount.
Example: If SSA lowers your regular SSDI payment by $300 due to the workers’ compensation offset, then $300 of your workers’ compensation benefit is taxable.
If you receive workers’ compensation benefits as well as SSDI payments at the same time, the total amount you receive cannot be more than 80 percent of your average current earnings before your disability.
However, not all benefits reduce your SSDI payments. For instance, Veteran’s Administration benefits and Supplemental Security Income (SSI) payments do not affect your SSDI amount. Additionally, if social security taxes were already deducted from state and local government payments, you will likely not owe extra come April.
You will need to contact the Social Security Administration (SSA) about any changes in your workers’ comp benefits or any lump sum disability payments that you might receive. At Ramos & Law, our Georgia workers’ compensation attorneys can help you handle the specifics of your claim to ensure that you are accurately reporting your benefits and recovering the fullest amount possible.
Is Workers’ Comp Disability Taxable?
Do you pay taxes on workers’ comp? Generally, the answer is no, but there are some exceptions. For instance, if you continue to work or return to work in a light capacity under doctor’s orders while receiving disability payments, those regular wages may be taxable. Additionally, if your workers’ compensation benefits include SSDI or SSI income, you may be taxed. If you have specific questions about your claim, reach out to a workers’ compensation lawyer for legal advice tailored to your needs.
Is TTD From Workers’ Comp Taxable?
TTD in Georgia stands for Temporary Total Disability Benefits, and since it is paid through workers’ comp, it is not considered taxable income. You may be able to collect TTD when a doctor says that you cannot return to work or your employer cannot provide light-duty activities while you recover. TTD benefits can last for a maximum of 400 weeks, but they will be lifted if you voluntarily return to work beforehand, or if a doctor clears you for permanent partial disability benefits or light-work duty.
The pay rate for TTD was updated in the Georgia legislature in 2023. Injured workers in Georgia may now receive two-thirds of their weekly wage, with a maximum of $800 per week and no less than $50 per week, unless their weekly wage is below $50. If you believe that you are being underpaid, contact a workers’ comp attorney for help calculating your TTD benefits.
Workers’ Comp, Taxes, and Reporting to the IRS
Remember, workers’ compensation proceeds should not be taxable.
Here are just a few tips for paying taxes this year:
- Watch for tax forms. Your employers should be sending you a W-2 form (for taxable income) and/or a 1099-MISC (for contract work). If your employer hasn’t sent the appropriate tax forms, contact them immediately. Please note that you should not be receiving any tax forms reflecting the workers’ compensation benefits you received. There are no W2 or 1099 forms for workers’ compensation payouts. Tax rates are calculated based on wages, not benefits received.
- Pay federal and state taxes. Taxes to both sources are usually due on the same date.
- Check for tax breaks. You may qualify for deductions based on student loan interest, mortgage interest, education costs, charitable gifts, childcare, and more.
- Start early. There may be a mistake on your tax forms or some other unforeseen glitch. Waiting until the last minute could turn little problems into big fiascos.
Finally, if you need help navigating complications, such as a subsequent injury, contact a Georgia workers’ comp attorney at Ramos & Law for help.
Georgia Workers’ Compensation Law Firm
Unlike some other firms, Ramos & Law only handles claims for injured Georgia workers. Our workers’ comp law firm maintains a laser focus on getting Georgia workers the full and total compensation that they deserve after being injured at work.
Our experienced Georgia workers’ compensation lawyers include Bryan C. Ramos, Esq., who co-founded Ramos & Law after seeing from the inside the ruthless tactics insurance companies often employ to avoid paying workers their full due, as well as Rotsen “Chinny” Law, Esq., an experienced legal advocate, conflict resolution scholar, and recognized “Rising Star” of the American Bar Association.
Our workers’ comp law firm in Georgia fights for the rights of injured workers. If you need help, our Georgia workers’ compensation attorneys are available to take your call and help ensure that you do not walk away from a settlement with less than you deserve.
Frequently Asked Questions About Workers’ Compensation and Taxes
Do Families Need to Pay Taxes on Workers’ Compensation Death Benefits?
In most cases, workers’ compensation payments are considered tax-exempt, and this exemption also applies to survivors (or dependents) of workers who have lost their lives on the job.
Are Retirement Plan Benefits Taxable?
Unfortunately, yes. Retirement benefits that you receive based on age or length of services are considered taxable, even when the predominant cause of taking the retirement was the work injury.
Does Salary Paid for a Work Injury Toll the Workers’ Compensation Statute of Limitations?
Yes, salary paid on account of the injury is considered weekly benefits under Georgia law (O.C.G.A. 34-9-82) and can toll, or pause, the one-year statute of limitations for filing a workers’ comp claim.
Have Questions About Workers’ Comp and Taxes? Contact Our Georgia Workers’ Comp Law Firm
Ramos & Law is a preeminent workers’ compensation law firm in Georgia ready to assist you with your workers’ compensation claim. Contact us today for a free, personalized consultation about your case, and find out how we may be able to help you maximize your benefits.
