Workers' Comp --> earned income --> EIC?

Doug · Joined: 25 Aug 2007 Posts: 19

It does take the place of wages. That's the whole point of disability
pay.

I work at 'Storefront' and have a client whose husband has been
receiving "Temp Total Disability" paid through a "Workman's
Compensation Claims Account." He also received a lump sum for back
wages paid by Social Security in December, and Soc Sec is now paying
about $700 a month. Whether his disability is total is now being
disputed. However, be that as it may, he did receive this money, and
can either of these count as earned income toward Earned Income
Credit? Thanks.

-Doug

Archived from group: misc>taxes

Phil Marti · Joined: 25 Aug 2007 Posts: 2520

"Doug" wrote:

> I work at 'Storefront' and have a client whose husband has been
> receiving "Temp Total Disability" paid through a "Workman's
> Compensation Claims Account." He also received a lump sum for back
> wages paid by Social Security in December, and Soc Sec is now paying
> about $700 a month. Whether his disability is total is now being
> disputed. However, be that as it may, he did receive this money, and
> can either of these count as earned income toward Earned Income
> Credit?

Social Security, definitely not.

The other payment isn't clear. If it's worker's comp, then it's exempt from
tax by law and not earned income for the EITC. If he's receiving taxable
disability payments reported as wages on a W-2 it is earned income for the
EITC.
--
Phil Marti
Clarksburg, MD

Doug · Joined: 25 Aug 2007 Posts: 19

I know with disability payments, a distinction is made between before
minimum retirement age and after. And a distinction is also made
between employer-provided disability and insurance you pay for
yourself.

I see what you're saying about workers' comp being exempt from tax and
thus logically . . . but are there any exceptions to this? As I'm
sure you know, taxes are a combination of partially logically and
partially (?) narrative, lore.

I am leaning toward it not being earned income for EIC, but I'd like
to push pretty hard. The couple is having a hard time finding legal
representation, the wife started a women's clothing store which lost
money, all together a pretty rough year, and this is kind of their
last chance for a measure of justice.

-Doug

Phil Marti · Joined: 25 Aug 2007 Posts: 2520

"Doug" wrote:

>I know with disability payments, a distinction is made between before
> minimum retirement age and after. And a distinction is also made
> between employer-provided disability and insurance you pay for
> yourself.
>
> I see what you're saying about workers' comp being exempt from tax and
> thus logically . . . but are there any exceptions to this? As I'm
> sure you know, taxes are a combination of partially logically and
> partially (?) narrative, lore.

I hedged in the original response because it wasn't clear to me whether we
were talking about workers' comp or something in place thereof. That's why
I mentioned the W-2. If it's truly workers' comp it isn't earned income.
Period. If it's something else that winds up being reported as wages, then
it's earned income for the EITC.

--
Phil Marti
Clarksburg, MD

Doug · Joined: 25 Aug 2007 Posts: 19

Phil,

You are right. I found in Pub. 596 Earned Income Credit (EIC), page
11, examples of what is not considered earned income: "social security
and railroad retirement benefits (including disability benefits) . . .
workers' compensation benefits."

I talked with the client. The only reason they have left to file is
for the economic stimulus check.

-Doug

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