What will the taxes be on my workers’ comp benefits or settlement?

Wondering what the taxes will be on your workers’ comp benefits? For most people the answer is none. Workers’ compensation payments are generally tax-free for the entire time that you receive them. Per IRS Publication 525, Temporary Total Disability (TTD) benefits in Georgia are not subject to income tax.  Neither are Temporary Partial Disability (TPD) benefits and Permanent Partial Disability (PPD) benefits. So, there will be no tax consequences associated with your workers’ compensation benefits (or workers’ comp settlements).

Exception to Tax-Exempt Status

Per IRS Publication 525, if you’re on Social Security, and it has been reduced by the amount of workers’ compensation benefits you’re being paid, that amount is likely taxable. Specifically, if part of your workers’ compensation reduces your Social Security, that part is treated as Social Security income and could be taxable. This type of situation may happen, for example, if a worker becomes disabled. The injured worker might receive disability insurance and workers’ comp payments at the same time and the Social Security payments would be reduced. The difference created by the workers’ comp payments becomes taxable.

Will the workers’ comp insurer send me a 1099 or W-2?

Since your workers’ comp is not taxable, you will not be issued a 1099 or W-2. If your employer or workers comp insurer did issue you one, call your workers’ compensation attorney or the Georgia State Board of Workers Compensation to find out what you can do.

How do I report workers’ comp on my tax form?

Since the payments received as workers’ compensation are fully exempt from tax, you do not need to include your benefits or settlement payment(s) on your tax return.

 Are workers’ comp survivors benefits taxable?

Workers’ compensation survivors benefits are not taxable. The survivors that receive compensation get the same tax protections that injured workers receive. 

Your workers’ compensation attorney can help you understand your tax responsibilities when it comes to your compensation payments. If you have been injured at work contact our law offices to speak to a knowledgeable Atlanta workers’ compensation lawyer at 404-354-5432.

Editor’s Note: This post was originally published in January 2016 and has been updated for accuracy and comprehensiveness.