Because workers’ compensation law is oftentimes complex and confusing, it can sometimes be hard to wrap your head around the true financial impact of an award. You will have some financial obligations to settle after you win your award, and that will affect your total take home amount. In today’s blog, we take a closer look at some of the financial obligations you may owe after your workers’ compensation case is settled so that you can better understand a more accurate representation of how much you’ll take home after taxes and fees.
Work Comp And Taxes
Let’s start with some good news. Workers’ compensation awards are not taxed like standard income, so you don’t need to be afraid of receiving a major tax bill next year. Even most personal injury awards are not subjected to taxes, although you would have tax ramifications from any punitive damages you receive after a personal injury. But when it comes to a workers’ compensation award, know that Uncle Sam isn’t going to try to take his cut.
Work Comp And Attorney Fees
You will have to settle up with your attorney after you win your case or agree to a settlement. As we’ve discussed on the blog in the past, workers’ compensation lawyers work on a contingent basis, meaning they only get paid when you win an award. In Minnesota, a lawyer is not allowed to collect more than 20 percent of an award, and the maximum amount they can collect is $26,000. This means that if you earn a $100,000 award, you will owe your attorney 20% of that amount, or $20,000. If you earn an award worth $150,000 or $400,000, 20 percent of that amount would exceed the $26,000 cap, so in both instances, you would owe your lawyer $26,000.
Many people think that they can avoid paying 20 percent to a lawyer by winning a case on their own, and in many instances they are able to secure a settlement. For instance, you may be able to collect $20,000 for your injuries and keep the whole amount. However, there’s a very good chance that a lawyer would have been able to get you a much larger settlement because of their understanding of the law and their familiarity with insurance company negotiation tactics. It’s better to pay than 20 percent on a $40,000 award than to keep the full $20,000 you earned for yourself, plus they save you an immense amount of time and effort during the process!
Work Comp And Social Security
If you are collecting workers’ compensation benefits and social security benefits at the same time, you may see a change in your social security payments. Your social security payments will be reduced if your combined earnings from workers’ compensation and social security exceed 80 percent of your total average earnings. The reason your social security benefits may be decreased is because social security is taxable, and your payments will need to be adjusted to reflect the workers’ compensation benefits you are also receiving. So while social security will not affect your workers’ compensation take home amount, winning an award can affect your social security benefits.
Work Comp And Medical Expenses
Finally, your workers’ compensation award will include payments for medical services received and account for future medical care. If you have paid certain medical expenses out of pocket, you will be compensated for these expenses. However, if your insurance company has footed the bill for some or all of your medical expenses, then some of your award may be earmarked for your insurance provider. After all, if your insurance company paid for your medical expenses and then your company’s insurance company is deemed to be responsible for those medical expenses, they would owe that money to the payer, which is your insurance company, not you. Your lawyer can help explain if any of your award is required to go to your insurance provider based on payments they’ve already made for your care.
For more information about the financial implications of an injury award, or to talk to a lawyer about your claim options, pick up the phone and call Dean and the team at Margolis Law Firm today at (952) 230-2700.
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