SOCIAL SECURITY WORKERS COMP OFFSET

[catax]

I have a client receiving Social Security that has a large workers comp offset. But the box 5 amount doesn't reflect this reduction in social security benefits. Just in the type down below. In my research I am not finding any information on how I can reduce the taxable amount. It doesn't seem correct that they should have their workers comp taxed as social security. Any help would be appreciated. Nena

[jainen]

>>It doesn't seem correct that they should have their workers comp taxed as social security<<

Does it seem more correct that they should get a tax deduction for repaying tax-free workers comp benefits?

[catax]

I guess I don't understand your point. I am open to other interpretations of facts but I just do not understand this. My understanding is one form of compensation is taxable (social security) and one form is not (Workmans Compensation). My understanding is that the social security benefits were reduced because she received Workmans Compensation. So if they received income that was not taxable (workmans comp) and they didn't receive the taxable income (social security) why does that now make nontaxable income taxable?

[lbbwest]

I guess I don't understand your point. I am open to other interpretations of facts but I just do not understand this. My understanding is one form of compensation is taxable (social security) and one form is not (Workmans Compensation). My understanding is that the social security benefits were reduced because she received Workmans Compensation. So if they received income that was not taxable (workmans comp) and they didn't receive the taxable income (social security) why does that now make nontaxable income taxable?

I'm the dim bulb in the box, I don't understand you, please use imaginary numbers (not the math variety the not real variety to explain.) It sounds like.. you are saying client received $10,000 in worker's comp (non taxable) and $1,000 in Social Security Benefits, but Box 5 of Social Security 1099 says $11,000; so the system is wanting to tax them on $11,000 instead of $1,000. Is that scenario correct? If it IS correct you have to research the flow of funds. If the social security is disability there may have been a disagreement between the worker's comp and SS, and worker's comp won. If it is Retirement benefits could be the same problem. General Motors for instance pays worker's comp UNTIL Soc. Sec. disability kicks in; (many times it kicks in retroactively) and then, their insurance company is "paid back."

As always the correct answer is "it depends." Not enough information to properly assess the situation. lbb

[catax]

I'm the dim bulb in the box, I don't understand you, please use imaginary numbers (not the math variety the not real variety to explain.) It sounds like.. you are saying client received $10,000 in worker's comp (non taxable) and $1,000 in Social Security Benefits, but Box 5 of Social Security 1099 says $11,000; so the system is wanting to tax them on $11,000 instead of $1,000. Is that scenario correct? If it IS correct you have to research the flow of funds. If the social security is disability there may have been a disagreement between the worker's comp and SS, and worker's comp won. If it is Retirement benefits could be the same problem. General Motors for instance pays worker's comp UNTIL Soc. Sec. disability kicks in; (many times it kicks in retroactively) and then, their insurance company is "paid back."

As always the correct answer is "it depends." Not enough information to properly assess the situation. lbb

Here are the numbers. This is social security disability not retirement.

Box 3: 20,850

Box 5: 20,850

Description of the amount in box 3

Paid by check or direct deposit: $7644

Workers' comp offset $13,206

Total Additions $20,850

Benefits for 2007 $20850

The actually received $7644 from Social Security and $13,206 from worker's comp. However the way it is listed on the statement makes it all taxable as social security. My question is this doesn't seem correct because they received non-taxable (workers' comp) income and then the social security statement makes it taxable. If anyone can clarify this for me I would appreciate it.

[kcjenkins]

It may not seem fair, it may not be fair, but it is the law. That's the way Congress wrote it, so we are stuck with it.

[lbbwest]

Here are the numbers. This is social security disability not retirement.

Box 3: 20,850

Box 5: 20,850

Description of the amount in box 3

Paid by check or direct deposit: $7644

Workers' comp offset $13,206

Total Additions $20,850

Benefits for 2007 $20850

The actually received $7644 from Social Security and $13,206 from worker's comp. However the way it is listed on the statement makes it all taxable as social security. My question is this doesn't seem correct because they received non-taxable (workers' comp) income and then the social security statement makes it taxable. If anyone can clarify this for me I would appreciate it.

If you read my previous post, I've ALREADY explained the possibilities. lbb

[catax]

I think I am getting this but for some reason it is slow to come. I thought the offset was due to the Social Security kicking in for only over the amount of what workmans compensation paid. Is what you are all telling me that Social Security pays back workmans comp and that is why it is all taxable? Nena

[lbbwest]

I think I am getting this but for some reason it is slow to come. I thought the offset was due to the Social Security kicking in for only over the amount of what workmans compensation paid. Is what you are all telling me that Social Security pays back workmans comp and that is why it is all taxable? Nena

Bascially. "I thought the offset was due to the Social Security kicking in for only over the amount of what workmans compensation paid."

Workman's Comp AND Social Security Disability are NOT going to pay for the same period for the SAME disability; (that's a double dip.) Both are slow to pay but Social Security is even slower than most noncontested WC cases.

Let me give you a blatent example; real life usually doesn't come this clean; Joe Disabled can't work because he hurt his leg at work; he fell. At first WC kicks in because it appears to be work related. It turns out that Joe has degenerative arthritis and his balance is bad and is going to get worse. NOT work related. Social Security Disability is RETROACTIVE to the date he couldn't work. Because it was NOT work related and the WC insurance PAID Joe, they submit a claim to SS. SS says well, Joe ALREADY got the money from WC Ins. so we are going to send it back to them. IF Joe had not received WC insurance the retroactive amount would have gone directly to him.

Does THIS clarify anything? lbb

[catax]

This does clarify it for me. Thank you for taking the time to reply. I had just understood from the client that they had received the payments from both last year. THey had also received the social security on their return for a short period of the previous year. So that is where my confustion came from for me. I understood they were reeiving payments from both all year. This may have been a misunderstanding on my part. But with your help I have the info to discuss this further with them. I have not run into this before. Thank you. Nena