Are Sacramento Workers Comp Benefits Taxable?

At the beginning of the 20th Century, laws were passed requiring employers to compensate workers if they are injured on the job. The employer would pay his medical bills and part of his wages while he recovered. In exchange, the worker gave up his right to sue for negligence.

The government does not tax your workers compensation benefits except in special circumstances. These benefits are not normally considered taxable income at the state or federal level in California. The exception is when an individual receives both workers compensation and disability benefits. In some cases, the Social Security Administration (SSA) may reduce a person's disability payments so that the combined amount is not too high. This is called the workers' compensation offset.



The amount of workers' comp that is taxable is the same amount by which Social Security reduces your disability payments. Thus, if SSA lowers your monthly SSDI check by $250 due to the workers' compensation offset, then $250 of your work comp is taxable.

An injured worker can try and settle their workers' compensation case on a full and final basis at any point during the pendency of the claim. A full and final settlement is exactly what it sounds like; the injured worker agrees to close their claim permanently and end the insurance company's responsibility for future benefits.

Settlements are voluntary for both sides. You can only settle a case if the other side is willing to negotiate a settlement. There is no way to force them to do so. The amount of any settlement is based on the two things. First, the cost of what the insurance carrier might have to pay in the future if the claim is not settled. Second, the chances that you will win and they will have to pay for those benefits.

If your claim is denied and you try to settle a case to avoid the risk of losing a hearing and getting nothing, the amount of the settlement might be lower. The insurance company is basing the settlement on what the entire case could cost if they lose the hearing. A settlement in that situation could include the cost of wage loss benefits (called temporary disability benefits), medical benefits, and permanent disability benefits (as well as other benefits that sometimes apply in these cases). Often times in these cases, the settlement is only based on potential additional permanent disability benefits and medical benefits.

Regardless, full and final settlements are almost always paid out in a lump sum (i.e. all at once).

If you're an employee who has suffered a work-related injury or illness, you may be entitled to workers compensation benefits. Unfortunately, employers or their insurance companies routinely deny workers' comp claims, even when they’re legitimate—which leaves injured employees to face a complex system of appeals. At that point, many applicants simply give up, while others try their best to navigate the system on their own

Get a Lawyer

Hiring a dedicated workers' compensation attorney will give you a much better chance of obtaining the benefits you deserve. An attorney will communicate with the workers' comp insurer on your behalf, gather medical evidence that supports your claim, negotiate a good settlement, and represent you at your workers comp hearing.