Many injured workers in Georgia ask us if their workers’ compensation benefits are taxable. Fortunately, they are not normally considered taxable income at the state or federal level.
Workers’ Compensation and Taxes
IRS Code 26 U.S. Code § 104 states that amounts received under workers’ compensation acts in recompense for injuries or sickness are not considered income. For example, let’s consider an Atlanta employee, who was hurt at work and received weekly income benefits in the amount of $12,000 before she returned to work. At the end of the tax year, she would not report the $12,000 to the IRS. She would not receive a W-2 or 1099 form either. These benefits are tax- free.
Additionally, should this Atlanta-based employee reach a settlement in her workers’ compensation case, the same IRS Code allows the settlement money to be tax-sheltered.
Attorney Bryan Ramos – Atlanta Work Comp Lawyer
There is one exception to this rule, however. A portion of the workers’ compensation income may be taxable if the injured worker is also receiving benefits through Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI). The combined workers’ compensation and social security benefits need to remain below a certain threshold.
In some cases, the Social Security Administration may reduce disability insurance payments to meet that threshold. The dollar amount of that reduction is what is considered to be taxable income of the workers’ compensation benefits. This is typically a relatively insignificant amount. However, every penny counts for injured workers who are off work.
Your Georgia Workers’ Compensation Lawyers
At the Ramos Law Firm, we recommend you speak to your tax professional for further details about your individual tax situation. Generally, an experienced workers’ compensation attorney can assist in structuring a settlement to maximize the non-taxable benefits.