Through the workers’ compensation system, you should be able to receive payments for any injury or loss stemming from a work-related accident. However, it is not always an easy process, so if you have questions or concerns about what tax implications this newfound source of income has, you are not the only one in Virginia.
Fortunately, tax burdens related to workers’ compensation in Hanover County are either minimal or nonexistent in most cases. However, the addition of Social Security disability benefits may complicate matters, so discussing your situation with a workers’ compensation lawyer can be beneficial.
There is almost no relationship between workers’ compensation and taxes in Hanover County. Workers’ comp payments are not taxable income, which is part of the reason these benefits are less than the worker’s pre-injury wages.
In extenuating circumstances—for example, if someone is also receiving Social Security disability—there may be an offset in which the beneficiary’s total income does not reach 80 percent of what they were making before the injury. If an injured employee seeking benefits has tax concerns, a Hanover attorney could help them navigate issues as they arise or refer them to a tax specialist so that the employee can address any issues with an expert.
As it pertains to workers’ compensation benefits, an employee’s average payment is the weekly average of their total earnings from their employer, as long as they have worked for the company at least one year. If an individual has been employed for less than one year, their average weekly payment is calculated based on either the total wages for the amount of time they have worked for the employer or the earnings a worker in the same position would have earned over the course of one year.
Average weekly wage considers gross wages before any taxes are taken out. However, it is important to note that while workers’ compensation wage loss benefits are not considered taxable income, injured employees who receive Social Security disability may have a separate federal tax offset that reduces the total amount of payment they may receive.
In certain cases, Hanover County employers may intentionally misclassify employees as independent contractors to avoid fulfilling their workers’ compensation insurance obligations. Companies with three or more employees are required to have workers’ compensation insurance, but employers are not required to insure independent contractors.
Since independent contractors pay their own taxes, employers who classify their employees as such have fewer payroll and tax accounting expenses. An experienced workers’ compensation attorney could be able to help an injured employee whose employer is claiming they are an independent contractor because the Workers’ Compensation Commission has certain requirements that determine if an employee is self-employed that may not have been met.
Taxes are not something to be concerned about when it comes to the money you receive through workers’ compensation benefits or a settlement. However, if you do have questions about taxes and workers’ compensation in Hanover County, a qualified lawyer can offer comprehensive guidance and support. To schedule a consultation, call today.