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When are workers’ comp benefits taxed?

Interest on past due Pennsylvania workers’compensation can be taxed by the I.R.S. In addition, if you are receiving social security disability benefits and weekly workers’ compensation or settled your workers’ compensation benefits, you may be taxed on Social Security benefits you never received.
Calculate the amount Social Security is offsetting your benefits due to receipt of workers’ compensation.

In the T.C. Summary Opinion of the United States Tax Court in Flores V. Commissioner No. 2005-57, the Special Trial Judge held Section 86(d)(3) of the Tax Code requires an injured worker to pay income tax on the amount of a workers’ compensation offset from social security disability benefits. The SSA-1099 provided by the Social Security Administration always shows both benefits received and the amount of a workers’ compensation offset for the year.So, the amount of Social Security Disabilty benefits being withheld due to receipt of work comp benefits is taxed as if the withheld amount were actually paid to you. However, you still may not have to pay any taxes. Social Security benefits are only subject to Federal Income tax if your adjusted gross income plus nontaxable interest and 50% of your benefits exceed a base amount of: $25,000.00 if you file taxes as an individual; $32,000.00 if you are married and file jointly; or zero if you are married and file separately, unless you lived apart for the entire year.

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Harrisburg, PA 17110
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Calhoon & Associates

2411 North Front Street
Harrisburg, PA 17110
Phone: 717-695-4722
Fax: 717-695-4988

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