The number one question that attorneys get from their clients when we think about money-related doubts in Workers’ Compensation is: are the benefits of Workers’ Comp cases taxable?
If you are an injured worker, you are already suffering from your lesions and everything else that comes with them. You wish to be focused on your recovery and the overall Workers’ Comp process. And, of course, the last thing you need to be worried about is money issues.
This article will explain what you must know about taxes regarding your worker's compensation benefits. Hopefully, with this new information, you can leave room in your mind to concentrate on what is important: your health.
Summary
1. What Are Workers’ Compensation Benefits?
2. Are Workers’ Compensation Benefits Taxed?
3. How Does the Payment Work?
What Are Workers’ Compensation Benefits?
If you get hurt in the workplace, you must file a claim to begin the compensation process. Besides, you are entitled to a benefit depending on the injury's outcome. In California, the Worker's Compensation Benefits system provides five major concession types, which are:
- Medical Treatment. Minor injuries can heal fast and don’t force the worker to stay out of the job for too long.
- Temporary Disability. Injuries that make the worker partially disabled for a significant period.
- Permanent Disability. Injuries that compromise a worker’s ability to make a living because they can no longer perform usual tasks.
- Supplemental Job Displacement. Compensation benefits for returning to work after an injury, whether in the same occupation or a different one.
- Death Benefits. When an injured worker dies, their family is entitled to receive some compensation. It depends if they are financially dependent on the deceased.
If you want to amplify this subject, you can read this article. There, you will find it explained in a simple yet thorough way.
Are Workers’ Compensation Benefits Taxed?
The answer is no. Although there are some exceptions to the tax-free status of Workers’ Compensation, benefits are not taxable in most cases. These exceptions might occur when you receive social security concessions, like supplemental income, other disability compensations, or retirement benefits.
We recommend you double-check your situation with an accountant or a tax professional. However, according to the experience with over 7000 clients throughout Northern California, your benefits will not be taxed, and here is why.
Workers’ Compensation is a public benefit created to protect the interests of injured workers. That's why it is free from taxes that would be redirected into the system otherwise. Also, it is a concession inserted into the same tax category as other advantages from the government, for example, public welfare.
How Does the Payment Work?
When you have suffered from a workplace hurt, you file a claim that gives you some benefits, depending on the injury.
Temporary disability is paid at2/3 of your average weekly wage.
But why does it happen that way? Because there would be some deductions made anyway, which correspond to the same net pay if you have these deductions out of your paycheck.
In other words, if you were receiving your regular paycheck, you would have some deductions. So, comparing your temporary disability benefit to your net pay, it is almost the same number as your regular pay minus these deductions.
On the other hand, permanent disability is paid at a lower rate. This benefit is not considered a wage replacement. It is a replacement for the fact that you lessen your earning capacity. That is, it is a result of a permanent impairment that cannot be corrected through medical treatment after your injury.
Compensation is not a taxable benefit, either way, as this concession is not regarded as income. It is like when you settle your case: It is considered a personal injury award, exempt from taxes in California.
Conclusion about Worker's Compensation Benefits
Benefit payment is one of the core issues in Workers’ Compensation. After all, you have to get your medical care and stay healthy. Besides, it can support you and your family, whichever is your case.
But now you know that, for the most part, the government will not deduct taxes from your benefits. Depending on your injury, you must identify what benefit you are entitled to. Then, ensure it is not related to other worker's compensation benefits that can result in a tax deduction.
So, we recommend you verify your case with an accountant but, most importantly, find an experienced attorney who can assist and help you. It would make the process much easier and ensure that everything comes out on the way.
Do you want someone to help you carry this burden? Talk to us for free at 800-606-6999.
Pacific Workers are The Lawyers for Injured Workers in Northern California. Besides, is the Premier Workers' Compensation Law Firm. Representing First Responders, Health Care Workers, Construction Workers, Delivery Workers, Warehouse Workers, and all the hard-working people who keep our community moving in their Fight for Justice against the Insurance Companies.
With over 250+ Five-Star Reviews, an incredible staff of caring, well-trained, advanced technology for superior client communication, a track record of an over 98%-win rate, and giving back to our community through the Pacific Workers' Foundation. It is easy to see why Pacific Workers' is the go-to law firm for all injured workers in Northern California. Offices in Oakland, Concord, Stockton, Tracy, San Jose, and Sacramento.
If you or a loved one need help or have questions, call us at 888-740-6434 or email us at Intakes@pacificworkers.com.
About the author
Bilal Kassem President and Co-founder
Introducing Bilal Kassem, the visionary leader of Pacific Workers. His unwavering commitment to excellence, empowering others at the core of our organization. With a flair for creativity, Bilal infuses fresh ideas into every initiative we take.
Drawing inspiration from captivating stories like “Goosebumps”, he guides our team with determination. Beyond his professional endeavors, Bilal embraces the great outdoors. As a result, relishing adventures such as backpacking and exploring uncharted territories. Sushi is his preferred treat, nourishing both his body and spirit.
In his free time, he enjoys hitting the gym and indulging in blockbuster films. Also, he finds motivation in the legacies of historical figures like George Patton. By leading with empathy, Bilal fosters a supportive atmosphere. This is why every team member feels empowered to excel.