How to File Income Tax When You Were on Worker's Compensation All Year
If you have been on workers' compensation all year, you need to take a different approach to your taxes than if you had been receiving your regular wages. Workers' compensation doesn't count as regular income, so your filing will be different.
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Instructions
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Understand the type of workers' compensation you are receiving. Workers' compensation paid due to a workplace injury in accordance with a workers' compensation act or statute is not taxable income. However, sick pay and retirement benefits of any kind -- even paid if you decided to retire because of a workplace injury -- are taxable. If you are unclear about the nature of your workers' compensation benefits, ask your employer.
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Consider your Social Security. If a portion of your workers' compensation benefits is drawn from your Social Security or Railroad Retirement benefits, that part of your workers' compensation income is taxable. Although this is not a direct tax on your workers' compensation, you will need to claim that portion of your benefits as Social Security payments or Railroad Retirement benefits on your return, and these are subject to tax. Your employer can help you understand how your workers' compensation payments are structured and if this applies to you.
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Assess whether you need to file a return. If you only received workers' compensation for an entire year, then you do not have any taxable income. However, if you had other streams of income that were taxable, you may need to file. This income could range from money from a home sale to an inheritance to money earned in a home business. The IRS has guidelines regarding how much income you can have before you have to file a tax return. These guidelines change from year to year, so check the filing information for the appropriate tax year to determine if your non-workers' compensation income is taxable. The filing guidelines are available on irs.gov.
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File your return, if necessary. The kind of supplemental income you received aside from your workers' compensation will determine the tax forms you need to file. With the possible exception of Social Security payouts described above, you do not need to include your workers' compensation on your return.
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