How to file taxes in Georgia when receiving workers’ compensation benefits
Workers’ compensation is the best way to recover expenses and life-altering damages when you have suffered an injury or illness at work. If you are an injured worker in Georgia, you may have already filed for workers’ compensation, but do you know how much you’ll get when it’s all said and done?
Generally speaking, Georgia residents don’t have to pay taxes on their workers’ compensation benefits (under normal circumstances).
It’s natural to question whether taxes must be paid as workers’ compensation laws in Georgia have been unfair in the past. However, the Workers’ Compensation Act has been updated and now protects workers under the law. However, workers’ compensation and taxation fall under a different code set by the IRS.
Georgia, like all states, must follow federal income tax codes set by the IRS. These laws state that if you suffer an occupation-related injury or illness, your compensation payments are not taxable. This law also considers payments made to the survivors in the event of a worker’s death.
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Here is your full guide to workers’ compensation and taxes according to Georgia law.
Are workers’ compensation settlements taxable in Georgia?
First, you should know that under IRS Code 26 U.S. Code § 104, amounts received due to workers’ compensation after an injury or sickness is not counted as income. So, consider a man who was hurt on the job. He received weekly workers’ compensation payments for $2,000. At the end of the tax year, he would not have to report that to the IRS, since it is not considered income.
In fact, he would not even list it on a W-2 or 1099 form. These benefits are classified as tax-free.
Even if you are a surviving spouse or family member of a worker who died as a result of an occupational hazard, illness or other accident, then you do not have to pay taxes on this either.
However, there are a few exceptions in which you may have to pay taxes.
Is workers’ compensation considered income when filing taxes?
Under Georgia law and IRS codes, workers’ compensation is not considered income. You do not have to claim it on any tax form.
In addition, as in the example above, if you reach a settlement in your workers’ compensation claim, the same IRS code also protects the settlement money.
Basically, workers’ compensation settlements are tax-sheltered, except in specific types of cases.
You probably have to report workers’ compensation on taxes if…
In some cases, workers’ compensation must be reported and is taxable.
You receive SSDI and SSI payments
- If you receive benefits through Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) as part of your workers’ compensation claim, then a part of your workers’ compensation income may be taxable.
- If your total amount combining workers’ compensation and SSDI or SSI benefits exceeds a certain threshold, then you will have to pay taxes on the excess.
- In most cases, Social Security diminishes disability insurance payments to ensure that the amount falls below the threshold. That reduced amount is what is considered taxable under the IRS.
You returned to work on light duty
In another case, you may want to return to work while still receiving workers’ compensation. This is called “light duty.” In this case, a portion of your wages will be taxed, but this is typical for any wage earned.
You receive interest payments
You won’t find too many cases where workers’ compensation is paid with interest, but if you do as part of your winning claim, the interest would have to be reported to the IRS. In this case, it is taxable.
These tax amounts should not amount to much, so if you have been told that you must report this income and pay a significant amount because of taxes by a financial advisor or tax preparer, you should seek a second opinion from a workers’ compensation lawyer near you.
Every bit counts, which is why you should fight to receive all of your workers’ compensation settlement and skip unnecessary taxes if possible.
Gerber & Holder Law wants to help with your workers’ compensation claim. Let us talk about your injury at work and how you can receive payments to help you in this stressful time. Contact us today for your free consultation.