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Worker's compensation laws are in place in Indiana and in every state in the US and those laws provide that the worker's compensation insurance company is only responsible to pay an injured worker anywhere from 60% to 66% of the gross wages of the employee before the injury according (each state has a slightly different percentage, but all of the state laws set the rate at between 60-66 %) and the gross amount is calculated by averaging the last 52 weeks of work with this employer prior to the date of injury (overtime must be calculated into the equation also - so in the event that an employee works a large amount of overtime, then that may reflect in a higher worker's compensation weekly payment while out of work recovering from an on the job injury).
No employer in Indiana (or any other state) must make up the difference in amount between the amount paid out by the workers compensation insurer and the amount that the employee regularly earns when working his/her regular job with the employer. In some cases, employees may have purchased a disability insurance policy or the employer may cover the employee with a disability insurance policy and depending upon the policy language, the disability insurance company may provide a weekly or monthly payment which will be the difference between the normal working pay of the employee and the lesser amount of 60 or 66% that the employee is now receiving under worker's compensation laws in Indiana.
In order to soften the blow of the loss of income when an employee goes out on worker;s compensation payments and is paid only 60-66% of their average weekly wage before the injury occurred is that the employee does not have to pay any federal or state taxes on the amount of the worker;s compensation payments being paid out weekly to the injured employee. In other words, there are no federal or state taxes withheld from the worker;s compensation weeekly check and the injured worker does not have to declare that money in a tax return at the end of each calendar year (if you were working your regular job, the employer would deduct state and federal taxes and other items and you would then file your tax return at the end of the year -- however, if your income is worker's compensation income, then the insurer does not make deductions for state and federal taxes and you do not have to declare the worker's compensation payments as income on your tax returns.
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