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Does Reduced Social Security Benefits Make Worker’s Comp Taxable?

When you receive Social Security disability benefits, the resulting amount of money you take in is considered taxable by the Internal Revenue Service much like your regular income. For some people, the situation becomes a little more complicated.

If you have been injured on the job and receive worker’s compensation benefits in addition to the Social Security disability benefits, you have some considerations to make when tax time comes around. Worker’s compensation benefits that you receive for lost time and wages during your injury recovery time is not taxable. You do not need to file those benefits as income on your annual taxes.

You do however need to report Social Security disability benefits (but not SSI benefits) to the IRS each year. Unfortunately it is not that simple. When you receive Social Security disability payments at the same time you get workers compensation benefits, your Social Security benefit amount is reduced and you can no longer receive the full amount.

The problem lies in the fact that even though your Social Security benefits have been cut, the total amount of deductions are still included as received benefits – even though you did not get these benefits. To the IRS, the full amount of Social Security received is taxable. Since you haven’t actually received that money, theoretically part of your worker’s compensation benefits is being taxed.

Ideally, you should consult with a tax professional if you run into this particular situation. An experienced tax advisor can help you work through your tax responsibilities concerning situations outside the norm. If you have issues concerning worker’s compensation benefits, contact our office today for a free consultation. You can reach us at 855-614-4351  or through our online contact form.