Having to file a claim for workers’ compensation is never easy. It is a stressful situation that millions of people endure every year because of an injury or illness suffered either on the job or due to their scope of employment. Workers’ compensation is not meant to completely replace your salary while out of work, but more so as a method to keep you above water until you can return. The benefits are paid out at two-thirds the rate of your current salary. Today, we will examine whether or not workers’ compensation payments can be subjected to tax withholdings.
Workers’ Compensation Payments are Tax Exempt
You are likely reading that headline with pleasure. Yes, workers’ compensation payments are entirely tax exempt. This means that when you receive the check in the mail, or via direct deposit, you will not see any tax withholdings whatsoever. The IRS states that any payments you receive for a work-related injury or illness as workers’ compensation are entirely exempt from tax if they were paid according to a statute or act related to workers’ compensation.
There is an Exception in Voorhees, NJ
There is an exception to the rule when it comes to taxing workers’ compensation payments. If there is an employee earning supplemental security income along with receiving workers’ compensation payments, the supplemental security income can be taxed. A very small amount of workers’ compensation payments are taxable if you also earn Social Security Disability Insurance on top of everything else.
Any compensation that is issued by the Social Security Administration would be lowered and then a small portion of your workers’ compensation payments would be taxed. The amount of money you normally earn plays a role in the taxable amount of workers’ compensation and for the most part, what people earn is usually not enough to qualify for payments to be taxed.
When the Workers’ Compensation Offset Applies
If you happen to be earning both Social Security Disability and workers’ compensation benefits, your total amount cannot exceed 80 percent of your average earnings right now.
Filing Tax Returns in Winslow Township, NJ
Since workers’ compensation payments will not have taxes withheld from them each pay period, many people wonder if they need to claim the payments as income on their annual tax returns. For the most part, the answer is no. You don’t need to list these payments when you file your annual income tax return since they are considered tax exempt. Workers’ compensation payments don’t last forever. They will be only administered for a specified period and will stop the minute you return to work or are deemed ready to return to work by a doctor.
What About Survivors?
If you are the survivor of a family member who was earning workers’ compensation benefits, you likely want to know if these are taxable or not. If the benefits continue to be paid to a survivor of the original recipient they are still considered tax exempt. You do not need to worry about paying taxes or having them withheld when they are transferred to you.
Contact a Cherry Hill Workers’ Compensation Lawyer to Discuss Your New Jersey Workplace Injury Case
A workplace injury can be devastating, particularly if it prevents you from returning to work for an extended period of time. Although New Jersey Workers’ Compensation laws are supposed to provide you with reimbursement for medical expenses and replacement pay for missed time at work, it is not always easy to get the Workers’ Comp benefits you deserve. That is why you should speak with a knowledgeable Workers’ Compensation lawyer about your situation and get guidance throughout the claims process. The experienced Workers’ Compensation attorneys at Begelman & Orlow, P. C. represent clients in Camden, Cherry Hill, Gloucester Township, Winslow, Pennsauken, Voorhees, Lindenwold, Haddon Township, Collingswood, Haddonfield and all across New Jersey. Call 856-428-6020 or email us today to schedule a consultation about your work injury case. Our main office is located at 411 Route 70 East Cherry Hill, NJ 08034.
The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.