Burdine & Brown
Is My Workers' Compensation or Personal Injury Settlement Taxed by The IRS?
Section 104 (a) (1) of the Internal Revenue Code clearly states: “…amounts received under workers' compensation acts as compensation for personal injuries or sickness are not taxable.” If so, then your receipt of a workers' compensation settlement is NOT taxable. The settlement must be a legal settlement in Georgia subject to Georgia laws to qualify as non-taxable. So check with your lawyer to be sure. In my entire practice of law, I have never had a client come back to me after they settled their case and said to me the IRS taxed their settlement amount. Always file a tax return each year and make sure to state the amount of your portion of the settlement on the appropriate IRS form. You should have no trouble at all. But please be wise instead of not filling the right IRS form just because you had NO other income other than your settlement from your case. You could get yourself in deep trouble doing this!