Tax Day is fast approaching. If you are collecting workers’ comp, you may be asking yourself How Does Workers’ Comp Affect My Tax Return? So, we figured that we would devote this edition of the blog to educating you about tax issues associated with a PA workers’ compensation claim.
Let’s face it, when you receive your paycheck every other week or however often you are paid, it’s frustrating to see that a significant amount of money is taken out for taxes – federal, state, and local. When it’s time to file your tax return, though, because you have paid so much in taxes during the year, you might be entitled to a refund, especially if you have some deductions. However, do you have to claim workers comp on taxes? Find out more from our workers’ comp attorneys.
No, your workers’ comp benefits are not taxable.
No, your workers’ comp. benefits will not be included on your W2 because the money is not taxable. Pennsylvania workers’ compensation law provides that your weekly benefit rate is calculated based on your “average weekly wage,” which is a determination of your gross wages you earned per week, on the average, over the one-year period preceding your injury. The general rule is that an injured worker is entitled to 66.7% of their average weekly wage in workers’ comp. benefits, but it can be as high as 90%. It can also be lower than 66.7% for high wage earners because there is a maximum weekly workers’ compensation rate. The bottom line, though, is regardless of the amount of your workers’ comp. benefits, no taxes will be taken out; it will not be reported on your W2 (if the only money you received in a year was workers’ comp. benefits, you will not get a W2), and you do not have to report the money on your tax return.
On one hand, the theory behind Pennsylvania workers’ compensation law is your check is not going to be as high as it was when you were working and earning wages for your employer before your injury. On the other hand, your money will not be taxed when you’re out on workers’ comp. so you should end up with the same amount in your pocket –except if you’re a six-figure wage earner.
So, do you have to pay taxes on your workers’ comp payments? You know now that if you injure yourself at work and collect workers’ comp. benefits, they will not be taxable. But make no mistake about it, you will have many other questions if you sustain a work injury, especially if the insurance company is jerking you around. At Pearson Koutcher Law, workers’ comp. is all we do—100% of the time. At our workers’ comp law firm, each of our lawyers have more than 25 years’ experience representing injured workers in workers’ comp. cases. If you hire a workers’ comp lawyer at Pearson Koutcher Law, you will have a knowledgeable, passionate workers’ comp attorney on your side who will work very hard to get you the best result in your case. Please contact us today for a free, comprehensive consultation.