Home to over 40,000 people and various industries, from manufacturing to health care, there are many hard-working people in Hickory. When someone suffers a work-related injury, it takes them off the floor.
Workers’ comp premiums are paid by employers, and the coverage extends to employees’ families in some cases. But are you required to pay taxes on workers’ compensation?
What Is Workers’ Compensation?
Workers’ compensation is a system of insurance that provides benefits to employees who are injured or become ill as a result of their job. The program is usually mandatory in most states, which means employers must provide coverage for their employees. In North Carolina, the Industrial Commission administers the state’s workers’ compensation program.
Are Workers’ Compensation Benefits Taxable?
No, workers’ comp benefits are not taxable. The IRS manual state, “The following payments are not taxable…Workers’ compensation for an occupational sickness or injury if paid under a workers compensation act or similar law.” This includes both the income replacement payments and the medical benefits. This tax exemption also applies to families of injured workers that died due to their injuries.
When Are Workers’ Comp Benefits Taxable?
There are only a few instances where workers’ compensation benefits may be taxable.
Restricted Duty: When an injured worker returns to work for light or modified duty, any wages they receive are taxable. There are exceptions to this, such as if they are also receiving Temporary Partial Disability Benefits. To learn more about what that means for you, contact a workers’ compensation attorney today.
Social Security Benefits: If you’re receiving Social Security Disability Insurance (SSDI), or Supplemental Security Income (SSI) this is considered supplemental and can be taxed. In this case, payments from SSDI or SSI are reduced, and the difference created by the amount of workers’ compensation would be taxable.
Workers Compensation Offset: This is when you are receiving benefits from both state disability insurance and workers’ compensation. The total amount cannot exceed two-thirds of your previous wages. Anything above that would be considered taxable income.
Get the Compensation You Deserve After an Injury
If you’ve been injured at work, you may be entitled to workers’ compensation benefits. These benefits can help you cover your medical expenses and lost wages while you recover from your injury.
An experienced Hickory workers’ compensation attorney can help you understand your rights and get the workers’ compensation settlement you deserve. Contact The Law Offices of Jason E. Taylor today to schedule a free consultation. We’ll review your case and answer any questions you have about workers’ comp benefits and taxation.