• Tom Fowler

Is Workman’s Comp Taxable in Iowa?

Workman’s comp can be extremely helpful if a worker suffers an on-job injury. It is necessary, as this compensation insurance has numerous benefits in times of need, especially to cover medical expenses, ongoing healthcare expenses, and lost wages. The compensation can, however, be difficult to settle and certainly unique depending on the severity of the case and situation.


Compensation to the workman falls on the basis of numerous determining factors, including location, type of job, and injury inflicted. Regardless of the compensatory amount an individual can receive, numerous questions remain to be answered. The most demanded question is - is workman's comp taxable? The Tom Fowler Law Article here presents a detailed guide that addresses this very question.


What Is Workman's Compensation Insurance?

What Is Workman's Compensation Insurance?


Workman's compensation insurance is a unique and exceptionally articulated insurance policy that protects employees against injuries or deaths due to workplace hazards. This was brought about by the Employees Compensation Act of 1923.


If you have been injured at work due to the negligence of your employer, contact Tom Fowler Law. They can answer questions such as how long you have to file and how much disability pays.


What Are the Workman's Comp Benefits?


The Workman's comp benefits include coverage for the following:


  • Physical injuries due to an accident resulting from employment.

  • Medical expenses for treatment of certain diseases that originated or aggravated due to the occupation.

  • Death of an employee because of a workplace hazard.

  • A permanent or partial disability because of workplace hazards.

  • Lost wages due to injuries or illnesses that prevent the employee's continuity of work.


What Do the Workman's Comp Benefits Not Cover?


The workman's comp benefit does not cover the following situations:


  • Any injuries that are a result of invasion or war conditions.

  • No partial or permanent disabilities due to the employment.

  • Accidents or injuries due to negligence of safety protocols.

  • The accidents or injuries under the influence of drugs and alcohol.


Is Workman's Comp Taxable?


The answer to this can be satisfying to those who are willing to claim the compensation, as the state and federal taxes do not apply to workman's comp. This covers medical expenses, ongoing healthcare expenses, lost wages, and other survivor benefits. Individuals can also receive additional benefits, including Social Security Disability (SSDI) or Supplemental Security Income (SSI). However, the states may levy taxes on such benefits.


What Is the Difference Between SSDI and SSI?


An employee receives additional benefits like Social Security Disability (SSDI) or Supplemental Security Income (SSI) in addition to the Workman's compensation. The difference between the two terms is defined based on eligibility.


SSDI is a tax-based federal insurance program that is given to those employees who fall under these categories:


  • Suffering from a disability

  • Have paid payroll taxes under social security

  • Have limited or low wages


SSI is a tax-based welfare insurance program that gives cash and healthcare to those who require special assistance or fall under any of these categories as mentioned:


  • The employee is above the age of 65 years

  • Any employee who is either blind or disabled

  • An employee has limited or low wages


How Much Tax Money Will a Person Pay, If Any?


If taxes are imposed on the workman's comp, only a portion would be retrieved from the compensatory amount.


Generally, the combined amount constituting Workman's comp and SSDI must not exceed the amount comprising 80% of the income of the employee before suffering from a workplace hazard. This is often referred to as the offsetting process. However, some states follow the reverse offsetting process in which the states reduce the workman's comp instead of the Social Security Disability beneficiary amount.


An individual must pay the workman comp tax only if the compensatory amount has exceeded the IRS limit.


Is Workman's Comp Tax Deductible?


No, the workman's comp is not tax deductible as they are non-taxable incomes. An individual can only claim tax deductions over expenses and not over compensatory amounts, as they are not a part of expenses. The Internal Revenue Service or IRS restricts employees from deducting workman's comp from taxes.


Can Workman's Comp Be Counted as an Income?


Although a workman's comp is non-taxable, it can still be considered a form of income. This is because other benefits like cash assistance, medical aid, or Supplemental Security Income (SSI) are granted to employees with low wages. As a result, the workman's comp determines the eligibility for such programs to continue. It is counted as an income.


Conclusion


Workman’s comp can be complex, especially if the parts or portion of the compensatory amount can be taxable or not. However, the Social Security Administration, to eliminate an SSDI offset, can deduct necessary expenses like workers comp lawyers in Des Moines expenses, medical expenses, and dependable costs from workman's compensation. Hence, to avoid any complications while filing a workman's compensation claim, it is suggested to have an experienced attorney for necessary legal help.