If my employer pays and taxes workman's compensation income as if it were regular income, how do I subtract that amount from my taxable income on my return?

Forum|Forum|5 years ago
March 4, 2021
2 replies
6 views

The employer withheld all federal taxes from the untaxable income. I was told that I need to enter the amount of workman's compensation as a negative value in the other income box, but it will not let me enter anything lower than 0

TurboTax Deluxe Online

DawnC

Level 15

Worker's compensation is not taxable but it should not be reported on a W-2 either. If you have a W-2 with worker's compensation on it, you need to get a corrected W-2. Are you sure it was worker's compensation and not short-term disability that is reported? Is disability income taxable?

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

mikesundanceAuthor

Level 2

Unfortunately yes. A long time ago they used to use a third party vendor to make the workman's comp payments so that they would not be taxed. But 10 or so years ago, they got rid of it and the employer pays it out and withholds taxes from it and leaves it up to us to figure out. Most injured employees end up having to go pay to have it done but I was told that it should be simple to do it here still. Although they know that the income is not supposed to be taxed, they do it anyways. They just use a different time reporting code on the pay check so that it clearly states what income was workman's comp and then they still tax it at the normal rates. As I understand, they typically don't give corrected W-2's so we have to figure it out ourselves or pay someone to get back what should never have been deducted in the first place