Workers’ compensation is an important no-fault system of insurance that’s there to help you if you get hurt in the line of your job. No matter the injury, as long as it happened in the course of your normal job duties, you’re entitled to benefits to help cover your medical bills and a portion of your lost wages. A skilled worker’s comp attorney in Greensboro, North Carolina, can help fight for the compensation you deserve.
For many people, these benefits are essential to making ends meet and getting back on their feet. It’s not unreasonable to wonder if you’re going to have to pay taxes on those benefits and to wonder how you’re going to handle the situation if that does happen. Learn about the taxability of your workers’ comp benefits, whether you’ll need to pay the IRS at tax time, and the importance of contacting Lewis & Keller directly after filing your injury claim.
Workers’ Compensation and Taxes
Let’s start with the good news. First, the lion’s share of your workers’ compensation is for covering medical expenses. In short, it’s reimbursing you for the money you have to pay out for necessary expenses. Because of that, it’s not taxable. In terms of the portion to compensate you for lost wages, it only covers a portion of your wages, and the government understands that as well.
Because of these factors, workers’ compensation benefits, for the most part, are simply not taxable. So, in general, you won’t have to worry about this.
Social Security and Workers’ Comp
Here’s the rub: some people receive both Social Security disability benefits as well as workers’ compensation. If this is the case, you may have a portion of your benefits taxed. This is where it gets somewhat complex. If your Social Security benefits are offset by your workers’ compensation benefits, that portion of your benefits will be taxed.
Offset happens when your Social Security and workers’ compensation benefits combined are more than 80 percent of the average earnings you received before you were injured. In this case, the Social Security you receive will be reduced by the difference, and that same amount will be taxable from your workers’ compensation.
Breaking It Down
For example, let’s say you earn on average $2,000 a month before you get hurt. Your workers’ compensation and Social Security benefits together amount to $1,750 per month. Since 80 percent of $2,000 is $1,600, you are $150 over that. Your Social Security will be reduced by $150, and that same amount of your workers’ compensation benefits will be taxable.
To complicate things a bit more, you will still only be taxable if your combined income is over $25,000 for a single person, or $32,000 for a married couple, including half of your Social Security benefits. Because of this fact, it’s very rare that people who receive an offset will be taxed.
Workers’ Compensation Attorney
Workers’ compensation can be confusing and the tax issues surrounding it can be even more so. If you need basic advice on how to pursue your case, or whether your benefits will be taxable, your best bet is to start by talking to an experienced worker’s comp attorney in Greensboro. For help and advice in this area, contact Lewis & Keller today.
