Do you need to pay taxes on money received from a Workman's Comp settlement???

Answer 1

YOU ARE NOT REQUIRED TO PAY ANY TAXES ANYTIME ON WORKERS COMP.ALSO KEEP IN MIND ,YOUR WORKERS COMP INSURER IS 100% RESPONSIBLE FOR ALL YOUR MEDICAL COSTS RELATED TO YOUR INJURY. YOU ARE TO COLLECT 66 2/3% OF YOUR WAGES, WHICH IS "NOT" INCLUDED IN YOUR FINALL SETTLEMENT,WHICH IS ALSO TAX FREE. YOU SHOULD CONTACT YOUR STATE EMPLOYMENT COMMISION AND HAVE THEM SEND YOU THEIR BOOKLET ON YOUR WORKERS COMP RIGHTS. IT IS VERY IMPORTANT THAT YOU UNDERSTAND ALL OF YOUR RIGHTS AS PRESCRIBED BY YOUR STATE AND NOT AN ARM CHAIR ATTOURNEY.

Answer 2

No; a Workman's Comp settlement appears to be non-taxable. Reference Code Sec.104(a)(1). You should get it in writing from the payor of the settlement exactly what it is.

Answer 3

No, it is tax free.......initially.......but if you remove the money from the settlement out of the annuity account that was originally set up and reinvest the funds into something else of your choosing the interest $ become tax deductible.
So, if the insurance company puts 250k into an account which they will pay you $2500 monthly for 20 years, that money is all tax free....once you remove the money from the original account it becomes taxable.

Answer 4

If the payment is for medical expenses or loss of use, then no. If the money is compensation for work days you missed, then you do have to pay taxes on it.

Another possible source of taxable income is if the money you receive is reimbursement for medical expenses that you paid through a flexible spending account. (A FSA account comes from money you set aside before taxes.)

Answer 5

Yes, unfortunately you do, it becomes income so you have to pay income taxes on it as though it were income from a job.

Answer 6

no,

http://www.irs.gov/publications/p525/ar02.html#d0e4517