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Frequently Asked Questions about Workers' Compensation and Social Security Disability

 


Q: ARE WORKERS COMPENSATION BENEFITS TAXABLE?

A: No. Workers Compensation benefits in New York are generally not taxable at the Federal, State and Local level.

The Internal Revnue Service (IRS) has confirmed this in its widely used Publication 17 that helps explain a multitude of issues, including the Workers Compensation Benefit Non-Taxability:

 "Amounts you receive as workers' compensation for an occupational sickness or injury are fully exempt from tax if they are paid under a workers' compensation act or a statute in the nature of a workers' compensation act. The exemption also applies to your survivors. The exemption, however, does not apply to retirement plan benefits you receive based on your age, length of service, or prior contributions to the plan, even if you retired because of an occupational sickness or injury."

However, there is an unfortunate exception when you receive both Social Security Disability and Workers Compensation Benefits. Social Security Benefits are taxable to a certain extent. If you receive both Social Security Disability Benefits and Workers Compensation, then Social Security may be reduced by a certain amount due to your receipt of Workers Compensation Benefits (you can only receive up to 80% of your pre-disability earnings form both sources, otherwise, Social Security reduces its benefits). However, our friends at the IRS tax you on the FULL amount of the Social Security Benefit, even if it has been reduced by Workers Compensation!!!!

"If part of your workers' compensation reduces your social security or equivalent railroad retirement benefits received, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. For more information, see Publication 915, Social Security and Equivalent Railroad Retirement Benefits."

Therefore, it is always in your best interest to consult with your tax professional. But be assured, your workers compensation benefits in general are non-taxable (whether weekly payments, lump-sums or medical payments).

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If you have any questions, please feel free to contact Markhoff & Mittman, 866.205.2415 or click our contact us section and we will be happy to review your file for FREE and advise you if you are getting the right information!

Helping Work Accident Victims Throughout New York State

Markhoff & Mittman PC serves injured workers and their families throughout New York State from Albany to Patchogue and everywhere in between including White Plains, Yonkers, Port Chester, Bronx, Manhattan, Brooklyn, New York City, Queens, Forrest Hills, Jamaica, Staten Island, Mt. Kisco, Ossining, Tarrytown, Peekskill, New City and elsewhere

 

 

 


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