Do You Have to Claim Workers’ Compensation on Your Taxes?
Most injury benefits, including workers’ compensation benefits, are tax-free.
No. Workers' compensation benefits are not taxable. Both lost wage replacement and medical bill payment benefits are exempt from all federal, state, and local taxes in Florida. The exemption, which also applies to workers’ compensation survivor benefits, means that these benefits do not appear on annual or other tax statements.
However, in some circumstances, workers' compensation benefits may be offset or terminated. For example, if an injured worker receives both workers' compensation and Social Security Disability Insurance (SSDI), and the combined benefits exceed 80% of average pre-disability earnings, the government may reduce SSDI benefits.
For most job injury victims, the tax exemption status takes a backseat to obtaining these benefits in the first place. Years of insurance premium reductions have drained money from the system, making claims examiners and administrative law judges (ALJs) less generous than ever. Only a determined Tampa workers’ compensation lawyer can obtain the benefits these victims and their families need and deserve.
Kinds of Benefits
Benefits are available for both trauma injuries, such as falls, and occupational diseases, such as hearing loss. In Florida, the amount of lost wage replacement usually hinges on the type of disability, as follows:
- Temporary Total Disability: Most falls and other trauma injuries are TTD injuries. These victims cannot work until they fully recover. Usually, workers’ compensation pays two-thirds of the victim’s AWW (average weekly wage), which includes regular and irregular cash and non-cash compensation for the duration of that disability.
- Temporary Partial Disability: Some victims can work on a limited basis, usually part-time or at a light-duty assignment, while they recover. These victims still collect lost wage benefits (two-thirds of the difference between the new and old incomes). In Florida, employers can terminate benefits if workers refuse light-duty assignments.
- Permanent Total Disability: PTD may be the smallest workers’ compensation wage replacement category. A Tampa workers’ compensation lawyer can obtain full disability benefits if the victim’s injury or illness precludes further employment, given the victim’s vocational, educational, and other relevant background.
- Permanent Partial Disability: Once victims reach MMI (maximum medical improvement), the doctor usually performs an RFC (residual functional capacity) test to determine how much the victim can work. Once again, the RFC test must also account for non-medical factors. Then, based on that assessment, the victim receives two-thirds of future lost wages.
Workers’ comp also pays all reasonably necessary medical bills. This benefit continues for up to 104 weeks (two years). So, if Marie’s initial injury requires a three-month recovery, her medical bill payment period continues for another 1.75, allowing a Tampa workers’ compensation lawyer to obtain upfront benefits for future medical costs. Marie is also entitled to lost wage replacement for any time she misses in the future, at least in most cases.
Obstacles to Benefits
AWW calculation disputes, medical necessity, and legal defenses are the three biggest obstacles to a non-taxable workers’ compensation settlement.
The AWW looks forward as well as backward. If Marie’s job injury causes her to miss a pay increase milestone, her AWW must be adjusted accordingly. To establish the reasonable necessity requirement, many attorneys partner with independent doctors who provide such evidence.
Alcohol or drug use at the time of injury is probably the most common workers’ compensation defense. A few others are available in a few situations.
Work With a Diligent Hillsborough County Lawyer
Victims need and deserve compensation for their serious injuries. For a confidential consultation with a board-certified workers’ compensation lawyer in Tampa, contact the Rooth Law Firm. We routinely handle matters throughout the Sunshine State.