My employer included my workers compensation wages in my gross wages on my W-2. I understand that workers compensation is not taxable. How do I deduct this income?

[DanO · Accepted solution]

Workers compensation for occupational sickness or injury are not taxable if paid under a workers' compensation act.

The W-2 will need to entered as it is because the IRS will be looking for that income.

But, you have a work around so you don't end up with increased taxable income.

• Sign into TurboTax
• Click on Take me to my return
• Click on Federal in left column
• Scroll down to Less Common Income and click Show more
• Scroll down to Miscellaneous Income, 1099-A, 1099-C and click Start
• Go to Other reportable income and click Start
• Any Other Taxable Income? click Yes
• Enter a description (workers' compensation correction) and enter Amount as a negative number
  

[scapjm]

I am using a desktop version of TurboTax Deluxe for 2019. I need to deduct the amount that my employer is being reimbursed by Worker Comp when I was out from 11/11/2019 through end of year. I was paid my regular wages but the employer will be reimbursed at NYS max for worker comp (about 904/week or approx 6328 - still awaiting the payment to employer but is pending). IE, about 6300 of my w-2 wages is non-taxable. How do I deduct that from my W-2 wages? The method you stated does not work with the desktop version. 

The only thing I could find was "sick or disability pay not on w-2" and it will not allow me to put in a negative amount. 

[Chrisc2141]

How do you figure out the exact negative amount to put in that box?

[Cynthiad66]

You should contact your Human Resources office for a breakdown of the workers compensation.  You can just make a call for that information and ask them to follow-up with a statement for your own records.

You can also compute for the number of months you were paid or worked, you can back out the salary and what remains is workers compensation.

Workers’ compensation benefits exist to provide relief to workers who suffer injuries in the workplace. Workers’ compensation can potentially help pay for immediate medical expenses and offset the economic impact of missing wages, but workers’ compensation may not fully cover the cost of a workplace injury. Some injured workers may wonder whether workers’ compensation benefits will affect their tax returns, and it is vital to understand how government benefits at the state and federal levels work to determine your tax obligations.

TAXABILITY OF WORKERS’ COMPENSATION BENEFITS

Workers’ compensation benefits do not qualify as taxable income at the state or federal level. Lump sum settlements from workers’ compensation cases do not count as taxable income either. Usually, workers’ compensation benefits will not affect your tax return. If you are currently on workers’ compensation benefits and do not see a W-2 for the tax year while you were on benefits, do not panic. You will not receive any tax documents about your workers’ compensation benefits and it is not necessary to include your workers’ compensation as income when you file your taxes.