Good afternoon irishbill-ga,
In researching state laws concerning workers compensation awards and
taxes, I have found the following information for you:
Any amounts you receive as workers' compensation for an occupational
sickness or injury are fully exempt from tax if they are paid under a
workers' compensation act or a statute in the nature of a workers'
compensation act. The exemption also applies to your survivor(s).
If part of your workers' compensation reduces your social security or
equivalent railroad retirement benefits received, that part is
considered social security (or equivalent railroad retirement)
benefits and may be taxable.
If you return to work after qualifying for workers' compensation,
payments you continue to receive while assigned to light duties are
taxable as wages.
SOURCE: Publication 554 (2003)
(http://www.irs.gov/publications/p554/ch02.html#d0e2345 )
====================
Must a worker pay income tax on workers' compensation benefits?
Generally not. Workers' compensation benefits are not subject to
either state or federal income tax. Sometimes, however, when benefits
have been delayed for a long period and an employer or insurance
company pays a worker interest in addition to the workers'
compensation benefits, those payments of interest may be subject to
both state and federal income tax.
SOURCE: Workers' Compensation Agency
(http://www.michigan.gov/wca/0,1607,7-191-28082-41852--F,00.html )
====================
According to the [United States] Tax Code, the only damages you can
enjoy tax-free are those which compensate you for physical injury or
physical sickness. (26 U.S.C. § 104(a)). So if this describes your
case, you will probably keep the cash safely away from the grip of the
IRS.
SOURCE: Findlaw.com
(http://public.findlaw.com/taxation/nolo/auntie/D06246AE-5467-42A5-9844563C86C7D97F.html
)
====================
Tax Code 26 U.S.C. § 104(a) states:
Sec. 104. - Compensation for injuries or sickness
(a) In general
Except in the case of amounts attributable to (and not in excess of)
deductions allowed under section 213 (relating to medical, etc.,
expenses) for any prior taxable year, gross income does not include -
(1) amounts received under workmen's compensation acts as compensation
for personal injuries or sickness;
SOURCE: Legal Information Institute
(http://www4.law.cornell.edu/uscode/26/104.html )
Please note that I am not a lawyer nor do I work for the IRS and I
cannot give you legal advice so if you are in a situation where you
need legal guidance, please seek the help of a professional lawyer.
I hope this information is useful and should this answer require a
further explanation, please request clarification before rating it and
I will be happy to look into this further.
Nenna-GA Google Answers Researcher
Google Search Terms: New York, lawsuit, award, taxable, workers compensation, IRS |
