Many people try to assess the tax implications for any major purchase or large sum of money they come into. Someone who wants to file for workers’ compensation after a workplace-related injury might, understandably, want to know how much of it will be taxed.
The answer is simple: none. Injured workers do not pay any tax on their workers’ compensation benefits.
Furthermore, your pre-tax wage or salary is the base number for which your benefits are determined. But the desire of some employers to avoid paying taxes can lead to negative consequences for some of the people who work for them.
Taxes Play No Part in Your Average Weekly Wage
When calculating a worker’s average weekly wage, we use their gross income – that is, the amount that they earn before taxes are taken out. The easiest way to calculate their average wage is to add up their gross income for the previous 52 weeks prior to the injury and then divide it by 52. If they have not worked 52 weeks at this job, then we go back as far as their employment goes, and then divide by that number of weeks. If they have worked 10 and a half weeks, the gross income will be divided by 10.5.
It is also not uncommon for an employee to get hurt on their very first day, especially in jobs that use heavy machines. In that instance, the calculation uses an official estimate of what somebody would normally make on that job – again, before taxes are taken out.
Employers Can Avoid Taxes by Misclassifying You
It is common practice among unscrupulous employers (especially those who employ truck drivers or other types of drivers) to purposely misclassify employees as independent contractors. One of the main reasons for doing this is to avoid paying a payroll tax. However, purposeful misclassification is illegal. A major downsides of being classified as an independent contractor is that you cannot file for workers’ compensation if you are injured on the job. If you believe this has happened to you, then you need a dedicated workers’ compensation lawyer who could help you rectify this situation and receive the financial relief that you deserve.
Contact Costa Ivone, LLC for All of Your Workers’ Compensation Needs
Whether you are concerned about being taken advantage of by your employer, or you are merely curious about how your benefits will be calculated, it is wise to give a call to the team at Costa Ivone. We could represent you in your workers’ comp claim or could take just a few minutes to answer any lingering questions you might have.
