Michigan workers compensation attorney blogs about the tax consequences for individuals receiving weekly benefits or a lump sum settlement.
It’s that time of year again and your income taxes will soon be due. Here are four tax tips regarding workers compensation that could help you prepare.
Remember, every situation is different and you should always seek the advice of a tax professional for your specific circumstances.
1. Workers compensation payments are income tax free.
It does not matter if you receive weekly checks or a lump sum settlement. You should owe no income tax on workers compensation payments received. However, you may owe tax on retirement plan contributions or other benefits paid by your employer.
2. Understand the hidden tax consequences of any lump sum settlement.
Some individuals with low incomes can get government help. Watch out if you are receiving SSI, Medicaid, food assistance, home heating credit, or other financial assistance. It is possible that a lump sum settlement from workers compensation could end your eligibility for these programs. You should always consult an experienced workers compensation attorney before you settle your claim.
3. Don’t forget about your W-2 and 1099.
Since workers compensation benefits are not taxable, they should not be included on either a W-2 or 1099. However, you could owe taxes for income that is earned during the same calendar year while you were working. Make sure that your employer provides the necessary tax information and don’t slip through the cracks. A simple telephone call to your employer could save you much stress and anxiety.
4. Hire a tax professional.
You should always consult a tax professional to make sure that you are complying with IRS regulations. Many accountants and other tax professionals will charge you less than $150.00 to review your taxes. This is a small amount of money to ensure peace of mind.
Call (855) 221-2667 for a free consultation with one of our workers compensation attorneys in Michigan. We will make sure that you get all the workers compensation benefits available under the law.
– Alex Berman is the founder of Michigan Workers Comp Lawyers. Hes been representing injured and disabled workers exclusively for more than 35 years. Alex has helped countless people obtain workers compensation benefits and never charges a fee to evaluate a case.