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Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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Is Workmans Compensation considered taxable ...

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Is Workmans Compensation considered taxable income in the state of Wisconsin? My husband and I are on Social Security living just above the poverty line. My husband got this settlement as a result of the injury that made him eligible for Workman's Compensation. He was advised to settle for one lump sum by his attorney. We put half of it in a CD that will mature in January 2008. This was in anticipation of any tax liability. We just want to know if we are going to have to pay taxes on this money. Thank you for your help

Please see for reference IRS publication 525, page 17 -

Amounts you receive as workers' compensation for an occupational sickness or injury are fully exempt from tax if they are paid under a workers' compensation act or a statute in the nature of a workers' compensation act. The exemption also applies to your survivors. The exemption, however, does not apply to retirement plan benefits you receive based on your age, length of service, or prior contributions to the plan, even if you retired because of an occupational sickness or injury.

Wisconsin taxable income is determined the same way as for federal.

The interest on CD will be taxable income. You will receive form 1099int from the band in January 2008 for portion of the interest allocated to 2007.

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