Are Workers’ Compensation Benefits Taxable in Georgia?

When you have a work-related injury or sickness, the best option to recover costs and permanently alter damages is through workers’ compensation. You may have already requested workers’ compensation if you are an injured employee in Georgia.

After filing and receiving benefits, you might be wondering if you need to pay taxes on the income from any workers’ compensation benefits you get or a settlement of your claim. Thankfully, you probably will not owe taxes on the money you get.

If you have recently been injured or already receiving workers’ compensation benefits, contact our Atlanta workers’ compensation attorneys in Atlanta at John Foy & Associates so we can represent your interests and answer any questions you may have. We will help you navigate this intricate system.

What Is Workers’ Compensation?

Workers’ compensation insurance offers financial aid or medical attention to employees who are hurt on the job or fall ill as a direct result of their work.

This insurance is paid for by the employer. The employee is not expected to contribute to the cost of compensation. The employer’s insurance provider pays weekly cash benefits and medical expenses as instructed by the Workers’ Compensation Board. The claims are handled by the Workers’ Compensation Board, a state organization. If the Board must intervene, it will decide whether the insurer will pay for medical expenses or monetary benefits, as well as the amounts that must be paid.

If the employer or insurance provider accepts that the illness or injury is work-related, the claim will be compensated. No monetary benefits are awarded if the employer or insurance provider contests the claim until the workers’ compensation law judge determines who is correct. 

A worker may be qualified for disability benefits in the interim if they are not already getting benefits because the employer or insurance provider claims that the injury is unrelated to the person’s job. However, any amounts paid out through the Disability Program will be deducted from subsequent payouts under the workers’ compensation system.

Is Workers’ Compensation Deemed Income Under the IRS? 

Workers’ compensation is not regarded as income under Georgia law or IRS regulations. It is not required to be claimed on any tax form.

The state of Georgia abides by federal income tax regulations, which say that payments received for work-related injuries or illnesses under a workers’ compensation legislation or statute are not taxable. The survivors of a worker who perished in a working accident and who get death benefits may also be subject to this law, as well.

Generally, reimbursement for illnesses or injuries received under workers’ compensation laws is not regarded as income under IRS Code 104.  A worker in Atlanta, for instance, who has a work-related accident and qualifies for disability benefits would get, say, $10,000 in weekly income benefits. That $10,000 will not be included in her yearly W2 Wage and Tax Statement.  

Additionally, the same IRS Code permits the settlement money in this Atlanta-based employee’s workers’ compensation case to be tax-sheltered. The same IRS regulation safeguards the settlement money if your workers’ compensation claim is resolved. Except in certain circumstances, most settlements from workers’ compensation claims are tax-sheltered.

When Is Workers’ Compensation Taxable? 

In some circumstances, workers’ compensation is taxable and requires reporting the income to the IRS. A portion of your workers’ compensation income may be taxable if you receive payments through Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) as part of your workers’ compensation claim. 

You must pay taxes on the excess if the sum of your workers’ compensation, SSDI, and SSI benefits exceeds a predetermined limit. Most of the time, Social Security reduces disability insurance benefits to make sure the sum is below the cutoff. According to the IRS, that diminished sum qualifies as taxable income.

Additionally, you might desire to go back to work even while you’re still getting workers’ compensation. It is referred to as “light duty.” In this instance, you will pay taxes on a portion of your salary, but this is standard for all salaries. 

Workers’ compensation is rarely paid with interest, but if it is as part of a successful claim, the interest must be reported to the IRS, as well. If a financial counselor or tax preparer has advised you that you must disclose this income and pay a sizeable sum because of taxes, you should get a second opinion from a workers’ compensation lawyer because these tax amounts shouldn’t be very large.

Why Do Workers’ Compensation Benefits Not Get Taxed?

Given that a portion of the benefit is meant to replace lost income, it is reasonable to assume that workers’ compensation payouts would be subject to taxation. Although the IRS generally levies taxes on all sorts of income, some are excluded. Because you are exempt from paying taxes on income derived from a workers’ compensation act or legislation for an occupational accident or illness, the IRS is not allowed to deduct taxes from workers’ compensation benefits. 

Workers’ compensation is regarded as non-taxable income due to its inclusion in the group of benefits and payments under the following categories: 

• A personal injury claim’s settlement.
• Disability payments from a no-fault auto insurance policy that pay for lost wages due to accidents-related injuries.
• Payment for the loss of a body part permanently or for permanent deformity.

 Workers’ compensation is classified as non-taxable income by the IRS since it is seen as a disability benefit. Although technically, you are not required to declare benefits as income on your tax return, you should nonetheless speak with a workers’ compensation lawyer about how you should declare your benefits for tax purposes.

Hiring a Workers’ Compensation Attorney 

We are seasoned professionals in workers’ compensation law at John Foy & Associates. We are equipped and knowledgeable to guide you through your case, collect proof of your harm and its cause, bargain with opposing parties, appeal a denial, and assist in any post-benefit questions regarding taxes.

We offer all clients a free consultation to go through the specifics of your case. We operate on a contingency basis if you determine that we are a good fit for your needs.

Call our office or complete the free case evaluation form on our contact page to arrange a meeting with one of our attorneys.