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Is Worker's Compensation payment to be added as income? I…

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Is Worker's Compensation payment...

Is Worker's Compensation payment to be added as income?

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I work and have received a Worker's Compensation payment as a result of an on the job accident. Is that payment to added to my total earned income for the year which I would calculate my tax requirement for the year.

Submitted: 9 months ago.Category: Tax
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8/16/2017
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 9 months ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,228
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Hi. My name's Lane.

...

Workers' compensation benefits are not normally considered taxable income at the state or federal level. The lone exception arises when an individual also receives disability benefits through Social Security disability insurance (SSDI) or Supplemental Security Income (SSI).

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Sometimes, SSA may reduce a person's SSDI or SSI so that the combined amount of the workers' comp benefits and the disability payments remains below a certain threshold. This is called the Workers Comp Offset.

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The amount of workers' comp that is taxable is the same amount that SSA reduces your disability payments.

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Hence, if SSA lowers your monthly SSDI check by $300 due to the workers' compensation offset, then $300 of your workers' comp is taxable.

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HOWEVER, you'd still have t be above the standard deduction and personal exemption amount for any of that taxable income to be high enough to be taxed (said differently, to be above the zero tax bracket).

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Most people who receive Social Security and workers' comp benefits don't have enough taxable income to owe federal taxes

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 9 months ago

So, the general rule is no - but if you have an offset (and you'd know as social security will send a letter), then it's possible, but not likely.

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Please let me know if you have ANY questions at all, before rating me.

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Thanks,

Lane

I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice on three continents since 1986.

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Customer reply replied 9 months ago
I'm 68, work full time, receive Social Security because of my age (not disability or SSI), received the Worker's Comp. Payment due to the on the job accident. Am I required to add that payment to my total income for the taxable year 2017?
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 9 months ago

No. Workers Compensation is not taxable.

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Again, only in the event of an offset. (And if you're receiving retirement Social Security that's an impossibility)

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 9 months ago

YOu can see that from IRS here: https://www.irs.gov/uac/taxable-or-non-taxable-income-1 (the exceptions that are mentioned are what I described) Does NOT apply in your situation.

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If this has helped, and you DON’T have other questions … I'd appreciate a positive rating, using the stars or faces on your screen, and then clicking “submit" – You may need to scroll up to see the stars.

...

But if you need more on this, please let me know.

Lane

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