If you suffer an injury at work, the legal team at Hey Workers can help you get every penny you deserve in the form of a workers’ compensation award or settlement. We specialize in getting large awards for our clients because we know just how financially crippling an injury that limits your ability to work can be. We work hard to get you the maximum award, and once you’ve received that award, you want to hang onto as much of it as possible.
Because of this, a common question we receive from clients during the compensation process is if they will have to pay taxes on their award. It’s a reasonable question, and we’re always happy to provide a little more guidance on how much money you can expect to keep after they win their award. Below, we talk about taxes and other financial commitments associated with your workers’ compensation award.
Will My Work Comp Settlement Be Taxed
Let’s start with the good news. In the vast majority of cases, a person’s workers’ compensation benefits will not be taxed under any state or federal law. You will not have to set aside money for a large tax bill at the end of the year. If you earn a workers’ compensation award or settlement in Minnesota, you shouldn’t expect to pay taxes on it.
One thing we’ll want to note, though, is that if you are also receiving Social Security benefits at the time of your award, you may notice a decrease in the amount of your Social Security payments. You may see that your Social Security payments have been decreased as a result of additional income in the form of a workers’ compensation award. This reduction in Social Security payments will only occur if your combined earnings from the two sources are more than 80 percent of your total typical earnings.
Will I Have To Pay Anything From My Workers’ Compensation Award?
Depending on how your award is settled and your medical bills are processed, you may have to pay back a portion of your award to the insurance company. For example, if you were awarded $3,000 for medical bills, but you didn’t end up paying that money out of pocket, the insurance company did, then that part of your compensation package is earmarked for the insurance company. Any medical expenses you cover out of your own pocket can be recouped through a workers’ compensation claim, but if your insurance pays for the expenses, you won’t get to collect reimbursement for medical bills you never actually paid. If typically is not an issue, but it’s just worth keeping in the back of your mind depending on how your award is paid out.
And finally, if you worked with an attorney to secure a far bigger award than you would have managed on your own, you’ll have to pay a portion of your award to your lawyer. Workers’ compensation lawyers work on a contingency fee, meaning that they are entitled to a portion of your award (typically 25-33%) if you win your case. If you lose, you owe nothing, even if they put in a lot of hours on your case. As we’ve discussed on our blog in the past, oftentimes a lawyer can more than pay for their services by getting you tens of thousands of dollars more than if you had gone it alone. So if you earn a $100,000 award, know that a fraction of that will have to be paid to your lawyer for their assistance in getting you that large sum.
In all, it’s worth noting that the total sum of your injury award may not be completely yours. That said, you’ll still have a hefty sum left over even if you pay back any minor obligations.
For more information, or for help receiving an injury award, reach out to the team at Hey Workers today.