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Colorado Injury Firm

Taxes in Denver Workers’ Compensation Cases

People may wonder about the role of taxes in Denver workers’ compensation cases and whether benefits received in workers’ compensation cases are taxable. Benefits received through workers’ compensation are not subject to both federal and state taxes. There are several reasons why this money is not taxed but simply put, these benefits are not considered earned income under tax laws.

The IRS and state legislature correctly decided it would be very unfair and unjust to require someone to pay taxes on benefits which are already paid at a reduced rate from the person’s normal pay. Thus, a person receives 2/3 of their gross average weekly wage for wage loss benefits, and the other 1/3 is considered the tax/deduction. Workers’ compensation settlement payments are non-taxable. If an individual wants to know more about workers’ compensation benefits and their rights as a worker, they should consult a knowledgeable workers’ compensation lawyer that could answer their questions.

Calculating a Weekly Wage

As previously mentioned, benefits in Denver workers’ compensation cases are not taxable, so the state or federal government do not have a right to take money out of any of those payments. There are several ways to calculate or define an injured worker’s average weekly wage, depending on how much the injured worker earned, how their wages are calculated or how they are paid. The average weekly wage is based on wages paid under contract of hire at the time of the injury or occupational disease. The objective is to reach a fair approximation of the injured worker’s actual wage and diminished earning capacity.

If someone is making a monthly salary, that person would take the gross monthly figure, multiply that by 12 for 12 months and then divide it by 52 weeks to get the average weekly wage. If it is a weekly contract of hire, such as week to week, that is the average weekly wage. If it is different each week then a person would take at least six weeks’ worth of payments and average it out. If someone was paid daily, a person would take the daily wage, multiply it by the number of days the injured worker was working at the time of the injury. If someone was paid hourly, a person could take the hourly rate multiplied by the number of hours worked per day at the time of injury which would give them the daily amount and then multiply that by the average number of days per week that the injured worker worked had the injury not intervened.

Calculating Wages For Those With Different Pay Schedules

If someone is paid on a piecemeal or commission status, then they would take the 12-month period preceding the injury and use that as the basis for calculating average weekly wage. Truck drivers are another unique situation because they are usually paid by the mile. So they would use earnings from the 60 days prior to the injury; but if the injured worker worked fewer than 60 days, the daily wage would be based on the average miles driven per day for such a period less than 60 days.

For other complicated or unique circumstances, there is a sort-of catch-all way to do it.  If none of these calculations make sense, then an administrative law judge would have broad discretion in calculating the average weekly wage. Usually, what happens is even in situations where it should be straightforward to calculate, if there is a disagreement between the parties on what the wage is and this usually comes in when workers’ comp carriers are trying to base the average weekly wage off of net payments instead the gross, and there are substantial business expenses or deductions not being taken into account. There are a lot of different factors that a person brings in front of a judge. The judge does have broad discretion to work it out so that it sounds fair to both sides.

Benefit of a Denver Workers’ Compensation Lawyer

The benefit of working with a skilled, local workers’ compensation lawyer is that they can explain different aspects of workers’ compensation cases. For example, they can explain the role of taxes in Denver workers’ compensation cases, and why benefits and settlements are not taxed. If you have been injured while on the clock, consult a skilled workers’ compensation lawyer that could advocate for you.

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