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Ed Johnson, Tax Preparer
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I received a permanent partial disability settlement from Labor

Resolved Question:

I received a permanent partial disability settlement from Labor and Industries this year. No taxes were deducted from the payment. Do I have to claim and be taxed on the settlement?
Submitted: 5 years ago.
Category: Tax
Expert:  Ed Johnson replied 5 years ago.

DearCustomer

 

This depends on what the payment was earmarked to replace.

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. (even if received in lump sum)

Customer: replied 5 years ago.
I RUPTURED 2 CERVICAL DISCS AT WORK AND L & I APPROVED THE SURGERY. A YEAR AFTER THE SURGERY, THEY SENT ME A CHECK FOR $10,000, THEN 3 CHECKS FOR $1500.00 EACH AND THE ONLY INFORMATION I RECEIVED WAS THAT MY CLAIM IS NOW CLOSED AND THE MONEY IS A SETTLEMENT FOR PERMANENT PARTIAL DISABILITY. THAT'S ALL I KNOW.
Expert:  Ed Johnson replied 5 years ago.

DearCustomer

 

IF this is part of workman's comp, then it is not taxable.

 

If on the other hand it replaces lost wages and is not workers comp, then it would be come taxable. since you said it was L&I, then L&I in Washington is worker's comp. this means it is not taxable.

 

You should recieve a 1099 at the end of the year, sometime in Janaury or early february, that 1099 will indicate the kind of payment it is and if it is taxable or not.

 

I am assuming that because it is for disability and it is L&I, that it is from the workman's compensation department and there for not taxable.

Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10760
Experience: GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
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