Taxpayer asks:
I received workers comp most of the year, will I receive a 1099 for these earnings?
taxgirl says:
Amounts you receive as workers’ compensation for an occupational sickness or injury are not taxable if they are paid under a workers’ compensation act or a statute in the nature of a workers’ compensation act; this also applies to your survivors.
There are some exceptions to this rule. The most common exception is that the benefits do not escape taxation if they are retirement plan benefits you receive based on your age, length of service, or prior contributions to the plan, even if you retired due to disability. Additionally, if part of your benefits reduces the amount that you receive from Social Security (or Railroad Retirement Benefits), that part is considered part of your SS or RRB benefits and may be taxable.
Worker’s compensation can be tricky. In some cases, if you are out of work short term, you will be allowed to return to work in a different capacity. If you return to work after qualifying for workers’ compensation, and are re-assigned to a job performing light duties, your wages are taxable just as before.
Before you go: be sure to read my disclaimer. Remember, I’m a lawyer and we love disclaimers.
If you have a question, here’s how to Ask The Taxgirl.
