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Workers’ Compensation Benefits and Income Tax

A work-related injury can cause immense pain and suffering to the employee, and in worst cases, it may even render them unfit to work.

Occupational_Safety_EquipmentThe worker may have to bear a lot of expenses for medical treatment and to make their ends meet for the time they are not able to go to work due to the injury. The silver lining for every injured worker is the workers’ compensation program that safeguards the interests of injured workers.

Compensation For All Medical Expenses

The program offers compensation for all the medical expenses incurred by the injured worker and provides disability benefits to those who are unable to return to work because of the injury. However, most injured workers do not know their rights and have many unanswered questions pertaining to workers’ compensation benefits. Kansas City Missouri workers’ compensation attorneys get several queries from injured workers mainly concerning the financial aspects.

The Most Common Question Answered

According to Kansas City Missouri workers’ compensation attorneys, apart from the usual queries related to how much workers compensation they are entitled to, and for how long they will be receiving those benefits, the most common query concerns taxation. Every injured worker wants to know whether the benefits he is receiving as workers’ compensation are taxable, or in other words, whether they have to pay federal income tax on the workers’ compensation benefits.

Their concern is quite understandable, because an injured worker is already bogged down by pain and suffering and is finding it hard to provide for their family’s needs, and in the midst of everything, having to pay federal taxes can turn out quite daunting. So, here is an answer to this common question, straight from the most experienced Kansas City Missouri workers’ compensation lawyers.

Workers’ Compensation Benefits are Tax-Exempt

Injured workers generally do not have to pay federal income tax on workers’ compensation benefits. For federal income tax purposes, workers’ compensation benefits awarded under a workers’ compensation statute or act because of work-related injury or sickness are fully exempt from tax. Not only this, even the surviving family members of a worker who has been killed in a workplace accident do not have to pay any taxes on the benefits received under the workers’ compensation program.

When Workers’ Compensation Benefits are Taxable

However, if a worker has received the benefits as a part of the retirement plan based on length of service, age, or prior contributions to the plan, he will be liable to pay income taxes on those benefits. This will hold true even if the worker retired because of a work-related injury or sickness.

If you have been injured at your workplace, and find navigating the complex workers’ compensation system difficult, you should consult The Law Office of James M. Hoffmann at (816) 399-3706. Not only will we guide you through the entire process, and make you aware of your legal rights, we will also help get your rightful workers’ compensation benefits in case the insurance company or the employer denies or delays them. Remember, workers’ compensation is every injured workers’ right, and they do not have to pay income tax on the amount received as workers’ compensation.

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Updated: August 21, 2019

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