Are workers’ comp payments taxable?

Tax tips for individuals who received Michigan workers’ comp benefits in 2018.

Workers' Comp payments taxable?We get lots of telephone calls about workers’ comp and federal income tax. People want to know if their weekly payments and/or lump sum settlements are taxable. This is especially true if a W2 or 1099 has not been provided by their employer. Here is some information you need to know about federal income taxes before the IRS filing deadline of April 15, 2019.

Payments received under Michigan’s workers’ comp law are income tax free. It does not matter whether a person is receiving weekly wage loss checks or a lump sum cash settlement. Individuals typically do not receive a W2 or 1099 for these amounts.

An individual on workers’ comp might owe taxes on income earned during the period before he or she was hurt. This is also true if a person was doing “light duty” and paid wages. We recommend contacting the employer to make sure a W2 form will be provided.

Some of our clients receive both workers’ comp and Social Security disability benefits. This has the potential to create an “offset” that could be taxable. It is best to speak with a tax professional under these circumstances.

Michigan Workers Comp Lawyers never charges a fee to evaluate a potential case. Our law firm has represented injured and disabled workers exclusively for more than 35 years. Call (844) 316-8033 for a free consultation today.

Related information:

Redemption Order (Form WC-113)

Photo courtesy of Creative Commons, by 401(K) 2012.

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