When you are injured at work in North Carolina, you may be eligible to receive NC Workers’ Compensation benefits. These benefits may include compensation for your lost or reduced wages, permanent injury to a body part (disability compensation), or compensation for all required medical treatment (medical compensation).
Will My NC Workers’ Compensation be Taxed?
A common question is: should the injured employee be prepared to pay taxes or set aside money to pay taxes based on the disability or medical compensation he or she received as part of the Workers’ Compensation claim? The short answer to this question is no. An injured employee will not be taxed by either the State of North Carolina or the United States Federal Government for any disability and/or medical compensation received by the injured employee.
This tax-free receipt of benefits applies to the injured employee’s receipt of temporary total disability compensation based on the fact that he or she is unable to return work.
Injured Employees are Taxed on their Reduced Wages
The injured employee is not taxed based on the receipt of temporary partial disability compensation but their reduced wages. The employee has returned to work under new restrictions.
Understanding Permanent Partial Disability Ratings
The injured employee can receive compensation for a permanent partial disability rating that is assigned to the injured body part. He or she is not required to pay taxes on this form of compensation.
There is also no tax obligation for an injured employee’s medical compensation paid to a treating physician regarding his or her Workers’ Compensation claim.
Resignations and Separate Agreements
Lastly, the funds injured employees receive as part of the settlement of their Workers’ Compensation claims are tax-free. The only exception to this would be if the injured employee was being asked to resign as part of the terms of settlement for Workers’ Compensation and the injured employer received funds from a separate agreement.
North Carolina Board Certified Workers’ Compensation Attorneys from Cardinal Law Partners have helped many clients address these issues that tend to surface during an injured employee’s Workers’ Compensation claim, in their extensive years of practice.
If you or a family member has any inquiries about Workers’ Compensation taxation, contact Cardinal Law Partners’ attorneys today. Our legal team is experienced in handling all areas of the North Carolina Workers’ Compensation Act and will help you navigate your way through your Workers’ Compensation case in North Carolina and the surrounding areas. Call 833-444-4257 to contact us today!