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Are Workers’ Comp & Social Security Disability Benefits Taxable?

tools used in calculating taxesIt’s everyone’s least favorite time of year – tax season! In theory, taxes should be simple – workers have deductions taken throughout the year and then by mid-April, complete paperwork which tells them if they owe or if they will be getting a refund. However, as everyone knows, taxes are anything but simple and can cause serious headaches for the person filing.

In order to help relieve some of the tax stress you might be feeling, we’ve put together information on how workers’ compensation and social security disability might impact your taxes.

Is My Workers’ Comp Claimed As Taxable Income?

If you’ve been hurt on the job and have had your workers’ comp claim approved, you are likely now wondering if the payments you have been receiving are viewed as taxable income.

The good news is that typically, any workers’ compensation that you receive is fully exempt from taxation! It doesn’t matter how much you’ve received in benefits, it does not need to be reported as income. However, if you continue to receive payments after you’ve returned to work and are on “light duty”, those payments may be considered taxable.

Are My Social Security Disability Benefits Taxable?

Social Security Disability is a bit more complicated than workers’ comp. According to the SSA, some recipients will have to pay taxes while others won’t, generally because of received income in addition to SSD benefits. It breaks down like this:

  1. If you are an individual and you claim income of more than $25,000, you will have to pay taxes on your benefits.
  2. If you are choosing to file jointly and you and your spouse have a combined income of more than $32,0000, you will have to pay taxes.
  3. If you are married and filing separately, you will most likely still have to pay taxes.

The SSA urges anyone receiving SSD benefits to contact the IRS with their questions. Even if the benefits are not taxable, they still need to be reported each year. The administration will provide you with form SSA-1099. 

information used in taxesWhat Happens If I Receive Workers’ Comp & SSD?

When you receive both workers’ comp and social security disability benefits, the issue of taxation becomes even more complicated. Overall, your SSD benefits will be reduced based on how much you recover from workers’ comp. However, the amount reported will still be the amount you would have obtained prior to the reduction, which means you may end up paying taxes for money you haven’t received, or rather for the money you are receiving through workers’ comp – which is supposedly not taxable.

The best approach you can take is to consult with a tax expert before you file to ensure this complicated process is completed correctly.

Still Struggling To Obtain Benefits?

If you are still fighting to obtain benefits and are wondering how it will impact your taxes in the future, feel free to contact our experienced legal team with your questions. Not only can we discuss the above information, but we can also help you fight for your benefits. Our lawyers have been helping injured workers for decades and we make it our mission to make sure that our clients get the maximum compensation possible.

We don’t just review your case and determine which legal avenues would be best for your situation, we also consult with industry and medical professionals, handle the paperwork, and we strive to ensure our clients are updated on the status of their claim every step of the way. We fully understand how stressful this time is which is why we do our best to should some of the burden for you, so that you can focus on healing and a brighter future.

Ask The Disability Guys

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Danielle Dexter, Workers Comp Client from Westchester County
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