Are Workers’ Compensation Settlements Taxed in Montana?

1040 form

Workers compensation is designed as a safety net for workers. It allows workers who suffer a workplace injury to receive the medical care and financial support they need. It serves to protect the finances and health of Montana workers and their families.

So are workers’ compensation settlements taxed in Montana? The short answer, no. In most cases, workers’ comp will not be taxed. Our workers’ comp lawyers delve deeper to show when taxes may be applicable.

Workers’ Comp In Montana

First, we look into what workers’ compensation entails, and how it works. In Montana, all employers are required to provide workers’ comp insurance. The insurance covers medical costs, wage loss, and other benefits. To be entitled to workers compensation in Montana you must meet three requirements:

  1. Your employer provides workers compensation benefits
  2. You are an employee.
  3. The injury or illness is work-related.

Workers compensation insurance is provided by one of three entities. In the event of a workplace injury, payout comes from the provider used. The three core types of insurance providers in Montana include:

  1. Private Insurance Companies
  2. The Montana State Fund
  3. Employer’s Self-Funded Plan

Getting workers’ compensation is not automatic. There are steps that you need to follow to make sure you get the coverage you need. Click here to learn what you need to do after a workplace injury or illness.

Is Workers’ Compensation Distribution Considered Income?

Yes, workers’ comp distribution is considered income. At the surface that sounds like workers’ compensation settlements would be taxable. In most cases, however, it does not need to be reported on your 1040 tax return form. In the cases where you do need to pay taxes, it will generally only be on a small portion of the payment.

Exceptions To Taxing Workers’ Comp

There are exceptions where your workers’ comp settlements may be taxed. The most likely scenario for the IRS deeming your settlement to be a taxable item is if you are receiving multiple insurance claims.

This can occur in the event that a worker ends up being disabled or their health fails to improve. In this scenario, they may be receiving social security and disability insurance at the same time. In this event, the payments can be taxed. Alternatively, if a worker is receiving supplemental security income at the same time as workers’ comp, they may be eligible to be taxed.

In both of these situations, taxes are determined based on the difference between the payments. If you believe you are being or will be, taxed unfairly you will need to seek out a workers comp lawyer.

Finding A Workers’ Compensation Lawyer In Montana

Getting the best Montana workers’ compensation lawyer, means finding a team with experience and a track record of success. You need a team that is capable of settling high but is also willing to take your trial to court to get what you deserve. Hoyt & Blewett workplace injury lawyers have received 18 personal injury verdicts in excess of $1,000,000.00 for their clients. If you need results, contact Hoyt & Blewett PLLC today!

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