Workers compensation tax laws
I'm receiving workers compensation benifits as a result of an on the job injury, is workers compensation taxible income? my employer can not give me an answer, and curently no taxes are being withheld from either the comp. provider or from my employer on the benifits I am receiving. Also how is this (income) handled when I file my taxes?
2 Answers from Attorneys
Re: Workers compensation tax laws
Typically, workers comp. due to personal injuries or sickness is exempt from tax under IRC Sec. 104(a), & Reg. 1.104-1...etc...You should call Ariz. Tax Office for details on the state law...You don't want to have tax problems w/fed. & Ariz. ...you can call the IRS for fed. law...good luck!!!
Re: Workers compensation tax laws
Workers compensation income is not subject to federal income tax; there is no withholding, and you do not declare the amount on your federal income tax return. However, I am not an Arizona lawyer. Therefore, although most states adopt the federal rules in this area, I cannot say for sure whether Arizona will tax the income or not. I would suggest that you contact your Arizona state tax authority and ask them what they do. Generally, the states have publications which explain their rules.
(This statement does not constitute my representation of you, nor is it an attorney-client communication.)
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