Disability Income Benefits

[Denne]

It seems that Disability if taxable if paid with pre-tax dollars. What about someone that is self employed. My client received payments after he got injured on one of his job sites. The odd thing is that the insurance company withheld Social Security and Medicare taxes from his payments.....then sent a notice that he should get credit on his W-2. He doesn't get a W-2 since is a sole proprietor and just files Schedule C. I am not quite sure how to handle this matter. The client did not receive any tax document from the insurance company. Any suggestions????

[mcb39]

My understanding is that Disability benefits are not taxable if the insurance is paid for by the individual with after tax dollars.