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Wednesday, April 13, 2011

Workers Compensation Taxable Rules US Tax Court

Seal of the United States Tax Court. Source: h...Image via WikipediaThe US Tax Court has ruled that workers' compensation payments are not excluded from US income tax under Section 104(a)(1) if they are paid as a Social Security Setoff Section 86(d)(3).

The majority of the states permit Social Security to take the setoff. A minority of states allow a reverse setoff where the insurance carrier takes the setoff, and the workers' compensation benefits are reduced.

“Nevertheless, … we are duty-bound to apply the law as written by Congress to the facts as they occurred and not as they might have occurred. Because [the taxpayer's] Social Security benefits were reduced by the amount of workers’ compensation benefits received, that offset amount is treated as a Social Security benefit and is, therefore, taxable,” the court said.


For over 3 decades the Law Offices of Jon L. Gelman  1.973.696.7900  jon@gelmans.com have been representing injured workers and their families who have suffered work related accidents and injuries.