The California Department of Industrial Relations reports that around half of a million workers are hurt on the job in the state annually. If you are injured at work, you may be entitled to workers’ comp to cover medical care and lost income. This raises an important question: Do you have to pay taxes on workers’ compensation benefits in California? As a general rule, the answer is ‘no’—workers’ comp are not subject to income taxes. In this article, our Fresno workers’ compensation lawyer discusses the key things you should know about the taxability of workers’ comp benefits in California.
Federal Income Tax Regulations: Workers’ Comp Benefits are Generally Not Taxed
If you are forced to miss time at work due to a job-related injury or occupational disease, you can file for temporary disability benefits to help cover lost wages. In California, these benefits are paid at two-thirds of the applicants average weekly wage prior to their injury. As of this year, the maximum weekly temporary disability payment of $1,356.31.
Although these benefits are only two-thirds of the normal income of most workers, the benefits are not subject to federal income taxes. As explained by the Internal Revenue Service (IRS), “amounts you receive as workers’ compensation for an occupational sickness or injury are fully exempt from tax if they’re paid under a workers’ compensation act.” You can claim your workers’ comp temporary disability benefits without worrying about state or federal income tax liability.
There May be a Social Security Disability Offset
While there is generally no income tax liability for workers’ compensation benefits, injured workers may be subject to a Social Security disability offset if they are also receiving concurrent SSDI benefits. In some cases, injured workers in Fresno County are eligible for both California workers’ comp benefits and Social Security Disability Insurance (SSDI) benefits. Federal regulations prevent people from so-called “double-dipping” in this regard.
As a general rule, the Social Security Administration (SSA) mandates that all SSDI benefits are reduced so that the total amount of monthly compensation being received is no greater than 80% of what a worker made prior to their injury/illness. For injured workers who are receiving SSDI benefits or are considering applying for SSDI benefits in the near future, it is important to consult with a workers’ comp lawyer who can help you structure your award so that you are in a position to receive the maximum allowable amount of total, collective compensation.
Speak to Our Fresno, CA Workers’ Compensation Attorney Today
Joseph C. Yrulegui is a skilled, results-oriented workers’ comp lawyer. Mr. Yrulegui will protect your rights and interests. If you have any questions about workers’ comp benefits and taxes, our team is here to help. Give us a call now or get in touch with us directly online for a confidential consultation. We represent injured workers in Fresno and the surrounding area, including in the San Joaquin Valley and throughout all of Central California.