Will My Workers’ Comp Benefits be Taxed as Income?
Will My Workers’ Comp Benefits be Taxed as Income in Washington, D.C.?
In D.C. as a rule, workers’ compensation benefits are not considered taxable income. You do not even need to include them on your tax return. The IRS does not tax these payments, regardless of whether you get them weekly or as part of a settlement. You will not have to worry about paying the IRS taxes on this money if you receive the benefits as part of a payment under a workers’ compensation statute or workers’ compensation act.
As an injured worker, you have certain rights in Washington, D.C. One of those rights is to get medical benefits and weekly wage replacement payments if you qualify. With the help of your workers’ compensation attorney, you may also receive a lump sum workers’ comp settlement for your injuries.
If you receive workers’ compensation benefits, whether they arrive weekly or as part of a settlement, you may wonder if your workers’ compensation benefits are taxable. You may also question if workers’ comp affects any of your other disability benefits.
Washington, D.C., also does not tax workers’ compensation benefits because it is not considered income. In most situations, you do not need to be concerned about income taxes on your benefits — they are tax-exempt.
This same rule applies to any benefits that survivors receive as well. If you lose a loved one in a work accident, the benefits you receive as a spouse or dependent are also not considered taxable wages.
In some situations, an employer will try to pay you directly (or pay your medical expenses directly) instead of giving you workers’ compensation benefits through their insurer. Employers should not try to go around the system like this, but they sometimes attempt to do so. They can occasionally save money by paying you directly and declining to report it to their insurance company. If you receive any payments like this, they will be taxable like your regular wages — but they should be the full amount of wages you were receiving at the time you got hurt. If you suspect your employer might be taking this type of action, talk to a Washington D.C. workers’ compensation attorney about how you should handle this situation.
What Happens If You Retire Due to a Work-Related Injury or Illness?
You can still receive workers’ comp benefits after you retire or your employer terminates your position as long as your injury prevents you from working.
The only partial exception to the general rule that your workers’ compensation benefits are not taxable relates to your retirement benefits. Any retirement benefits you receive are still taxable. This exception might directly affect your Social Security benefits.
For example, suppose you already receive Social Security and workers’ compensation benefits. In that case, the workers’ comp payments you receive might make a portion of your Social Security payments taxable.
What Happens If You Return to Work While Still Receiving Workers’ Comp?
In some situations, you can return to work to do “light duty.” Essentially, your doctor has told you that you may not be able to do as much work as before your accident, but you can still do some work. You might have physical limitations such as not lifting over a certain weight, or you may not be able to work an entire shift. In those circumstances, many employers will ask you to come back to work to do tasks that fit within the limitations your doctor gave you.
Any wages you earn while working are still taxed, even if you earn less than you did before your work injury. However, you might also receive temporary partial disability workers’ comp payments based on the difference between your regular pay and what you receive for light duty. Temporary partial disability benefits are not taxed.
What Is Social Security Disability Insurance, and How Will It Affect Your Workers’ Comp Benefits?
The Federal government, through the Social Security Administration (SSA), offers individuals two types of disability benefits.
Social Security Disability Insurance
Social Security Disability Insurance (SSDI) will pay you benefits if you become disabled yet work enough on a consistent or recent basis to qualify to receive benefits.
Supplemental Security Income
Supplemental Security Income (SSI) provides payments to adults and children who are disabled and have limited resources. The disability can occur for any reason, such as an accident or illness. Unlike workers’ comp benefits, you do not have to be injured at work to get SSI.
Workers’ compensation benefits can affect the amount of SSDI benefits you can receive. The benefits you receive from Social Security and workers’ compensation cannot be more than 80% of your income before your work injury. If you get more benefits than the 80% limit, then SSA will deduct the amount over 80% from your Social Security benefit payment.
However, if you settle your D.C. workers’ compensation claim, your attorney can help you draft your settlement documents in a way that can address this issue. With careful planning, you can often reduce the credit Social Security takes, so your SSDI benefits should increase after a workers’ comp settlement. An experienced workers’ compensation attorney can help you work through this complicated issue.
Unlike workers’ compensation benefits, some other public benefits do not affect your SSDI payments.
Supplemental Security Income (SSI)
Any SSI benefits you receive should not affect the amount of SSDI benefits you can get.
Veterans Administration Benefits
Any benefits you receive from the V.A. will also not affect how much you receive in disability payments.
How Can a D.C. Workers’ Comp Attorney Help You?
Although it is your right as an injured worker to receive workers’ compensation benefits, getting those benefits from your employer or workers’ compensation insurance company in D.C. is rarely easy. They might ignore your rights or pay you less to save money. Let an experienced attorney guide you through the workers’ compensation process, especially if your injury at work forces you to retire early or if you are close to retirement age. An experienced workers’ comp attorney will help you maximize your total financial benefits and recovery from all available sources.
Keep in mind that if your injury occurred in D.C., you should file your workers’ compensation claim in D.C. — and you need a dedicated D.C. law firm. Virginia or Maryland do not provide the same favorable benefits available to workers in D.C., so be sure that you get a D.C. lawyer to file your claim in D.C. correctly.
Are You Still Wondering If You Should Be Paying Taxes on Your Workers’ Compensation Award?
Contact us if you have any questions about your workers’ compensation benefit, income taxes, or how your work comp benefits affect other benefits. Our team of workers’ compensation lawyers will help you work through these complicated issues to help you get every penny you deserve.
Contact us today by calling 202-393-3320 or using our online contact form to schedule a free consultation. During your consultation, we will conduct a strategy session to help you fully understand our approach to securing your benefits.
