Should you put some money away to prepare to pay taxes on your workers’ compensation benefits? What about Social Security Disability Income? Will that be affected?
If you’ve been injured on the job and you have settled your workers’ compensation case with the help of a Missouri workers’ compensation attorney, you may be wondering if you have to worry about taxes on your workers’ compensation benefits.
Should you put some money away to prepare to pay taxes on your benefits? What about Social Security Disability Income? Will that be affected? Let’s discuss what you need to know about taxation and workers’ compensation in Missouri. Remember that you should always consult with an experienced attorney and a tax professional because each case is unique.
Workers’ Compensation Is Generally Not Taxable
Workers’ compensation benefits are not taxable on the federal level and are generally not taxed by Missouri. That means you generally will not have to worry about taxes on your workers’ compensation settlement. This is true whether you receive a lump sum payment, monthly benefits, or any other type of settlement.
You also will not be taxed on any of the temporary benefits you receive before your final settlement. In short, workers’ compensation benefits are generally not taxable.
This means you can rest assured that you will keep all of your benefits after settling your case. However, there is one complication that you may need to keep in mind, involving Social Security Disability Income (SSDI).
Social Security Disability Income (SSDI) May Be Altered and Taxed After Your Settlement
If you are disabled due to your accident, you may file for SSDI (Social Security Disability Income) and file a workers’ compensation claim. It is possible to receive both SSDI and workers’ compensation benefits at the same time.
However, it’s important to note that the Social Security Administration will typically reduce your disability benefits after your workers’ compensation filing. This is called “offsetting” and is done to prevent you from earning more than 80% of your previous annual wages in workers’ compensation and SSDI benefits.
In Missouri, temporary total disability, permanent total disability, and permanent partial disability pay 66 2/3% of the injured worker’s wages, so SSDI may augment this and bring you to 80% of your previous annual wages.
However, SSDI income is generally taxable, so you would need to pay taxes on this additional income. Keep this in mind when managing your finances after getting workers’ compensation benefits for your disability. We recommend that you consult with a tax professional to understand how much you will owe.
Speak With a Kansas City, MO Workers Compensation Attorney
Whether you want to be sure you’re getting the full benefits you deserve, you have questions about your payments, or you are facing an uncooperative employer, The Law Office of James M. Hoffmann can help. To speak with a Kansas City workers compensation attorney, give us a call 24/7.
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