In general, you do not have to report your workers’ compensation settlement money as income. Since it is not taxed, there is not much of a need to include it as income. However, there are situations where you may be required to report it to other governmental agencies. This is the case if you have certain types of benefits coming from other government-led programs. Each program has reporting requirements that you need to be mindful of. Failing to follow those requirements may terminate your benefits if the reporting issue becomes a consistent problem.
For example, Medicare is affected by having workers’ compensation benefits. According to the Centers for Medicare & Medicaid Services, workers’ compensation benefits will pay for a medical bill up to its maximum payout. The remainder of that bill will be sent to Medicare to be paid. Because you have workers’ compensation benefits, it will pay for medical costs first. This can change based on other programs you are involved in, as every program has its own rules and regulations regarding multiple payer systems.
Defining Workers’ Compensation
According to the Social Security Administration (SSA), workers’ compensation is a program designed to help workers avoid severe financial problems when they are injured at work. The program offers several types of benefits that can replace lost wages while workers recover, help them get the medical care that they need to get better, and help them get the rehabilitation services that they need to get back to work.
Workers’ compensation programs are regulated by the states as well as the federal government. This makes each state program slightly different. In some places, the program is entirely provided and controlled by the state. In other places, it is offered through insurance programs that companies maintain. Only companies pay for workers’ compensation. Employees are not expected to pay into them at all.
Workers can be enrolled in the workers’ compensation program alongside other benefits programs, such as Social Security. There are no provisions in the program that bans employees from enrolling in other benefits programs at the same time. However, the benefits that they receive from those other programs may change their benefits under workers’ compensation.
Types of Workers’ Compensation Settlements
Workers’ compensation programs can be settled in several ways. These types of settlements include:
- Agreement settlements: An agreement settlement is a contract where both sides agree to the amount of compensation that will be provided, and any other terms of the settlement. In states where the oversight board for workers’ compensation has the final word on agreements, an agreement settlement may be denied even if both parties agree to the terms. The system was put in place to protect workers from being forced to accept deals that were unfair.
- Compromise agreements: If both sides cannot agree on a final agreement, an oversight board administrator can create a compromise agreement. While neither side leaves with everything that they want, you are still able to get a resolution to your claim that does not outright deny any of your demands.
- Lump-sum agreements: A lump-sum agreement is a large payout of all of the compensation that you will receive. It is usually done in one payment but can be divided into several payments based on the terms of the agreement. Once you receive your payment, you are no longer entitled to any form of compensation in the future.
The different types of workers’ compensation settlements are designed to help workers and employers find a compromise and settle cases without legal action. Depending on which state you are in, there may be variations on these types of settlements. Before you accept any type of settlement, discuss it with your lawyer to make sure that it accurately represents your needs.
Workers’ Compensation Reporting Responsibilities
If you are involved in multiple benefits programs, you may be required to report your benefits to all of those programs. In some cases, your benefits may be affected by what you receive from another program.
Each program has its own rules about reporting as well. Managing multiple programs can be difficult if you are unsure of what the requirements are. Discuss your case with a lawyer to see if they can help you better manage your programs. A workers compensation attorney can help you understand your rights and responsibilities, make sense of all programs’ terms, conditions, provisions, and limitations, and make the best decisions for you.
Contact Us to Schedule a Consultation
Managing multiple benefits programs can be difficult with all of the requirements that you have to remember. While you may not have to report your workers’ compensation settlement money as income, you may be required to report to other benefits programs that you are currently enrolled in. Each program has its own reporting requirements, and the programs can affect each other. If you feel like you are struggling to balance all of your benefits programs, seek help from a lawyer. Contact the offices of Ben Crump Law, PLLC at (800) 603-4224 to discuss your case with our team.