Could Your Extra Money Be Nontaxable?

Worker's Compensation

If you’re collecting worker's compensation, you’re not required to pay taxes on it. There are federally regulated laws preventing the government from collecting taxes on this money, and it’s for everyone who collects it, though there is one caveat. You are subject to tax if you also collect disability funds from social security disability insurance or supplemental security income. If you collect either or both of these, call your tax accountant to discuss how you will pay your income taxes on your worker's compensation. The amount you’re taxed on is not the entire amount, however. For example, say you’re collecting disability from the Social Security Administration. If your new worker's compensation benefits affect the amount you normally receive, you’ll only be taxed on the difference, which means if your benefits drop by two hundred dollars because of your worker's compensation, you will only pay taxes on two hundred dollars of your compensation rather than the entire amount. It’s a complicated process, and it’s not one most individuals can easily handle without a little tax help.

Continue reading to reveal how child's support payments work during tax season.