A Complete Lump-Sum Workers' Compensation Settlement

Law Blog

When a workplace injury is permanent, you may be paid a lump-sum settlement from the workers' compensation carrier for your employer. Settlements often come after months of being paid partial wage payments and negotiations. When it's possible that you won't be able to work again, it's important to know what you are receiving with your settlement. The longer the period of time between your injury and the settlement, the more likely it is that you will have certain deductions like the ones below. Read on so that you will know what to expect to be deducted from your workers' comp settlement.

Income Taxes

In most cases, the vast majority of a workers' comp lump-sum settlement is free from taxes. Neither the partial disability wages you get or the settlement is considered income, so you won't need to list it on your income taxes or pay taxes on it. On the other hand, some settlements take so long to be paid that the hurt worker is paid interest. In that case, only the interest part of the settlement is taxed.

Unemployment Payments

Some hurt workers have no choice but to file for unemployment benefits after being unable to work at their jobs. If your claim was initially denied and you were paid state unemployment compensation, you may have those funds deducted from your settlement payment.

Medicare or Medicaid

In some instances, you are eligible for one of the above government medical benefit programs after being injured. Since Medicare and Medicaid are known as secondary payers, they have the right to be reimbursed from the settlement once it is paid.

Medical Liens

A lien gives an entity the right to freeze something pending payment. In some instances, a hurt worker enters into an arrangement to delay billing of needed medical care until after workers' compensation benefits, like a settlement, kicks in. The lien gives the medical facility or practitioner the right to seek compensation for services rendered.

Back Child Support

It takes a lot more than being hurt on the job to get court-ordered child support halted. In some cases, back child support can be removed from a settlement before you get the check.

Contingency Fee Arrangements

Workers who have problems with the workers' compensation agency may need to seek legal help. Workers' compensation lawyers will often agree to work on your case pending the successful outcome of a settlement. They then get paid from the settlement in a process known as contingency fee arrangements.

Once you have a good idea of what will be deducted from your settlement, you can use that to gain a more accurate idea of what you need to be paid. Talk to a workers' compensation lawyer to find out more about deductions from settlements.


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