workcomp settlement

Forum|Forum|3 years ago
March 20, 2023
3 replies
11 views

Client received 75000.00 workcomp settlement for medical put in bank then pulled 20,000.00 out to by a car and saving the rest for surgery. Wants to know if they are going to be taxed on that 20000.00?

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abctax55

Level 15

No, the withdrawal isn't taxable....

(unless he 'bys' a DeLorean <w>

Are you concerned about the taxability of the overall Workers Comp settlement?

HumanKind... Be Both

Camp1040

Level 10

Generally workmens comp is not taxable, unless TP was collecting social security disability while waiting for the settlement.

D

Dani70Author

Level 3

No he was not collecting anything else he was just concerned that because he pulled part of the money out to by a car and did not use all on his surgery that he was going to be taxed on it. I just did not want to give him incorrect information. That is why I reached out to the community for advice. We are all learning here and searching for more information to better help our clients. Thank you

Camp1040

Level 10

That sounds like an unusual workman's comp settlement.

qbteachmt

Level 15

Typically, payments to settle damages are not taxable. Whether you put it towards that need or not, isn't the issue of the settlement party. But now he's going to have a hard time going back for more money for more treatment, if whatever happens medically doesn't go well for him. That's too bad.

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BobKamman

Level 15

You don't go back for more after a settlement. Workers comp is no different from a car accident.

qbteachmt

Level 15

"Workers comp is no different from a car accident."

Exactly. A settlement from a car accident, to repair the car, is sometimes not used to repair the car. But then the owner cannot claim they found more damage that should be repaired under the same claim, when they didn't use the first amount to make any repairs. Having $1700 front bumper cover damage, then finding the motor mounts broke (a typical follow up claim), but not using the first $1700 for the bumper, is the same as this story line. Plenty of people are driving around with damaged cars, and they pocketed the money from the insurance company.

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