So you’ve had an accident on the job and its left you laid up, unable to get back to work. Aside from the mess you’re likely dealing with when it comes to lawyers, HR representatives and doctors, you’re also probably swimming in a sea of paperwork regarding how you’ll be compensated until you can get back on the job.
One common mistake people tend to make when learning more about how their income is going to be supplemented is confusing what it means to have Workman’s Compensation versus Social Security Disability. While you might be getting compensation through both programs, they’re very different and are viewed very differently in the eyes of the government when it comes to how you’ll be taxed come tax season.
Workman’s comp vs. Social Security Disability
The first step to understanding your tax situation is understanding the difference between Workman’s comp and Social Security Disability. Here’s a quick refresher on the definition of “disability” that each assumes:
- Social Security Disability not only requires you to be disabled from performing your current job, but also from other types of work that might be comparable to the work you’re trained and experienced doing. This is viewed as more of a long-term disability and one that may be permanently debilitating.
- Workman’s compensation assumes that your injury or disability is one that’s not permanent and that you’ll be able to recover and assume your job duties once you’re better. This is commonly a temporary view on disability.
The key idea that makes these two programs different in the eyes of the government is the severity and longevity of your injury. To that end, you’re going to have to approach tax prep in Elkhorn, WI differently depending on which program you’re receiving supplemental income from.
The bottom line for determining if you’ll be taxed on your supplemental income or not is what you’re receiving. Basically, it breaks down like this:
- If you’re receiving worker’s compensation, the government doesn’t view this as taxable income, since you’re likely receiving only a portion of your normal working wage.
- If you’re receiving Social Security Disability, this is considered to be normal income. Prepare to pay Uncle Sam come tax season, as you would for normal income.
- If you’re receiving a mix of worker’s comp and Social Security Disability, you’ll be taxed according to what percentage of your take home is SSD.
Even with these incredibly simplified terms, it can be hard to figure out what you’re being taxed for when the time finally comes for tax prep in Elkhorn, WI. If you’ve had an accident at work and are now receiving supplemental income while you’re on the road to recovery, the best thing you can do is to hire a tax professional to help you make sense of it all. You might just see it as another expense, but in the long run, you’ll understand it’s more of an investment as you walk away from your ordeal with your taxation situation all wrapped up nicely.